President Proposes to Reduce the Tax Gap - By One Percent

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The President's proposed budget released Monday includes some very minor measures that would close the "tax gap," the difference between the amount of taxes owed and the amount paid each year, by $3 billion a year. But this is, at most, 1 percent of the total tax gap. The IRS has estimated that the tax gap was around $300 billion in 2001 and most experts think even that number is an understatement. Senate Finance Chairman Max Baucus (D-MT) and other Democrats criticized the steps as not nearly enough to address the scope of the problem. This is reinforced by the fact that IRS Commissioner Mark Everson told the Senate Budget Committee last year that he could, in a given year, locate some of these taxes and increase collections by "between $50 billion and $100 billion without changing the dynamic between the IRS and the people." Democrats and Republicans have become concerned about the tax gap, because it results in compliant taxpayers effectively subsidizing the tax evasion of the less honest.

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