What You Need to Know
- The Treasury Office of Tax Analysis estimate that the president's plan would raise $700 billion in additional tax revenue.
- If no action is taken, the Treasury could fail to collect $7 trillion over the next decade, the office estimates.
- Biden wants to give the IRS nearly $80 billion in extra funding and regulate paid tax preparers.
The Treasury Department said Thursday that the tax gap totaled nearly $600 billion in 2019 and will rise to about $7 trillion over the course of the next decade if left unaddressed — roughly equal to 15% of taxes owed.
The Treasury analysis is part of a report released Thursday on President Joe Biden’s tax compliance initiatives that seek to close the “tax gap”— the difference between taxes owed to the government and actually paid — which were part of the proposals in the American Families Plan.
“These unpaid taxes come at a cost to American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax increases to compensate for the lost revenue,” Treasury said.
“While roughly 99% of taxes due on wages are paid to the Internal Revenue Service, compliance on less visible sources of income is estimated to be just 45%,” Treasury said.
The compliance proposals in the American Families Plan provide the IRS with resources and information to overhaul and enhance tax administration.
The Treasury Office of Tax Analysis estimates that these initiatives would raise $700 billion in additional tax revenue over the next decade.