by Cristina Begoña Martin Firvida
The Senate Finance Committee held a hearing today on closing the tax gap. The tax gap is the amount of federal taxes owed but not collected. The Washington Post recently reported that unpaid taxes amount to $345 billion, and unreported business income accounts for nearly a third of that amount. That same article reported that, according to the IRS, wage earners (whose income is withheld and reported to the IRS) will pay 99% of the taxes they owe. But business owners will pay less than half.
$345 billion could buy a lot of health care for the uninsured, help pay for the child care that lets us go to work, or finance public investments that we can all agree are needed to guarantee the kind of future we want for our children. So collecting the taxes that are owed and making sure everybody pays their fair share is a no-brainer, right?
Current Bush Administration proposals to close the tax gap would collect only one percent – one percent – of the amount that tax filers owe but have not paid. Henry Paulson, the Secretary of the Treasury, and the the guy ultimately in charge of the IRS, testified at today’s hearing, that to attempt to collect more from scofflaws would be too burdensome. Chairman Max Baucus (D-MT) and other committee members found this way of thinking insulting, at best – and we agree.
It’s ludicrous to imagine that if someone owed you money – a lot of money – you would settle quickly for one cent on the dollar, especially if you had bills to pay and were having a hard time making ends meet. The real burden is on the people who pay their taxes while the IRS ignores the millions of others who do not. In fact, the Taxpayer Advocate estimates that tax evasion puts an extra burden of $2,680 on every household in America. The Administration needs to get serious about making everyone—not just those who work for wages—pay what they owe.