Thursday, February 16, 2006

The Tax Gap

The tax gap is the difference between the amount of tax imposed on taxpayers and the amount paid by taxpayers. Yesterday, the Commissioner reported to a senate subcommittee the results of a study analyzing the tax compliance rates for 2001. Here's a brief summary of some interesting numbers.

The IRS has a voluntary compliance rate, as a whole, of 84%. This means that the IRS is collecting 84 of the tax that the American people are obligated (both legally and morally) to pay. So how much is that 16%? $345 billion dollars. That's a lot of cash. 56% of the gap is caused by underreporting of income, shaving some numbers here and there.

I just thought this information was interesting. I don't really have any personal thoughts on the matter, except to say that the number is higher than I would have guessed. The Commissioner thought that 84% compliance was high. So I guess he and I will have to agree to disagree. Here's a link to the story.


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