Sour Grapes
Of course we're Fair and Balanced!


Income tax cheating

Yesterday, I wondered why the IRS Commissioner had overpaid his taxes by so much. I meant to note it as my contribution to the income tax filing deadline. Today I have another contribution to make. Although I'm inclined to favor some form of national consumption tax, a more immediate concern is the so-called "tax gap." This same IRS Commissioner, Mark Everson, said yesterday:

Our estimate is that there's about a quarter of a trillion dollar tax gap every year that's a combination of underreporting, non-filing, and non-payment.

And that's probably on the low side, all things considered, because what it doesn't do is, our research doesn't address the changes in behaviors that took place during the '90s—these abusive shelters, the internationalization, the globalization of transactions, these investment banks and accounting firms that are... they're essentially stateless.

Other estimates of this gap range up closer to $500 billion. According to the Internal Revenue Service's statistics for 2002 over 130 million individual returns resulted in gross collections of just over $1 trillion. Assuming the numbers are roughly the same this year and since I don't cheat on my taxes, somewhere between 20 and 67¢ on each dollar I pay is to cover someone else's cheating (this calculation ignores corporate, employment, gift, excise and estate tax returns and collections). The tax gap is widely assumed to have greatly enlarged through the 1990s as the IRS became more "user friendly." I, for one, would like to see more effort put into narrowing this gap.

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