Everson Calls For Tools To Reduce Tax Gap

by Mike Godfrey, Tax-News.com, Washington

20 February 2006

IRS Commissioner Mark Everson believes that the agency has within its power the ability to reduce the 'tax gap' by as much as $100 billion without placing an undue strain on taxpayers.

Speaking before the Senate Budget Committee last week, Everson argued that given the appropriate level of funding and enforcement tools by the government, the IRS could reduce the amounting of outstanding taxes by between $50 billion and $100 billion.

The IRS recently estimated that the overall gross tax gap for Tax Year 2001 – the difference between what taxpayers should have paid and what they actually paid on a timely basis – comes to $345 billion. This figure falls at the high end of the range of $312 billion to $353 billion per year, according to an estimate released last March.

IRS enforcement activities, coupled with other late payments, recovered about $55 billion of the tax gap, leaving a net tax gap of $290 billion for Tax Year 2001.

Everson told lawmakers that the IRS is already making progress on closing the tax gap, and the agency predicts that taxpayer compliance will have increased from 83.5% to 85% by 2009. However, he conceded that achieving 100% compliance was probably an unobtainable goal that would require "draconian measures" and would put an intolerable burden on the taxpayer.

Nonetheless, some lawmakers, including committee chairman Sen. Judd Gregg (R - NH), appeared sympathetic to Everson's cause.

"Millions of hard-working Americans pay what they owe on-time, and we should not be punishing people who play by the rules by allowing others to cheat the system," stated Gregg in prepared remarks.

"As a government we must expand and improve our efforts to collect what is owed, and I am pleased to see the President continue to make this a priority in the budget he submitted to Congress last week. I hope we can work together with the Administration to step up our efforts to make sure that law-abiding Americans aren’t being short-changed," he added.

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