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.