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  • Ryan Wittler

The Treasury Department Released a New Report on Attacking the “Tax Gap”


On Wednesday, the Treasury Department released a new report making the case for a “robust attack on the tax gap,” in an attempt to bolster support among lawmakers for an investment in the Internal Revenue Service.

Some highlights:

According to the Treasury, the “tax gap” -- the difference between taxes that are owed and those that are collected -- totals around $600 billion a year and will amount to nearly $7 trillion in lost tax revenue over the next decade. That amounts to about 3% of the country’s total GDP, according to the report.

The Treasury also found that the wealthiest 1% of Americans fail to pay about $163 billion a year in taxes, or 28% of the country’s total amount of unpaid taxes. The top 5% of earners fail to pay about $307 billion, or 53% of the total.

Why it matters:

The report comes as the Treasury Department pushes lawmakers to support its ambitious proposal to beef up tax enforcement with an $80 billion investment in the IRS. According to the report, that investment would yield an estimated $320 billion in tax revenue over the next ten years.

However, a report from the Congressional Budget Office last week found that the beefed up IRS enforcement won’t raise as much money as the Treasury projects. Instead, it found the $80 billion investment would raise around $200 billion over a decade.

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