A senior Senate Democrat has called upon Internal Revenue Service Commissioner Mark Everson to explain recent remarks made before the chamber last week, where he claimed that the agency has the ability to collect up to $100 billion in extra tax without burdening the taxpayer.
Speaking before the Senate Budget Committee last week on the subject of the 'tax gap' - the difference between what taxpayers should have paid and what they actually paid on a timely basis - Everson argued that given the appropriate level of funding and enforcement tools by the government, the IRS could reduce the amount of outstanding taxes by between $50 billion and $100 billion.
Everson also told lawmakers that the IRS is already making progress on closing the tax gap, and is on course to increase the overall compliance rate from 83.5% to 85% by 2009.
However, Everson did not fully explain how the agency would go about collecting such a sum, and Sen. Max Baucus (D-Mon) has demanded that Everson provide a full analysis of how the IRS can narrow the tax gap which, according to the agency's latest estimate, stood at $345 billion in 2001.
In a letter to the IRS Commissioner dated Wednesday, Baucus noted that while the Administration's budget plan for fiscal 2007 contains five legislative proposals aimed at closing the tax gap that are estimated to raise $3.5 billion over ten years, or $350 million per year, the budget remained "essentially flat" after inflation.
"How does a flat budget with modest legislative proposals translate into the additional collections predicted last week? To what extent does IRS expect to achieve efficiency and productivity gains that would facilitate increased collections?" Baucus asked the IRS chief.
Baucus requested that the IRS identify, by March 8, 2006, "specific components" of the tax gap that will be reduced and explain how this reduction will be accomplished.
The letter also instructs Everson to indicate what actions can be undertaken "immediately" to reduce the tax gap without the need for new legislation.
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