Tuesday, September 26, 2006
The Federal Financial Management, Government Information, and International Security Subcommittee of the Senate Homeland Security and Governmental Affairs Committee holds a hearing today on Deconstructing the Tax Code: Uncollected Taxes and Issues of Transparency:
This hearing will highlight the 2006 updated estimate of the tax gap by the IRS; examine IRS efforts to close the tax gap as well as legislative solutions to increase taxpayer compliance; and explore the transparency of the tax code.
These are the witnesses scheduled to testify:
- Mark Everson, Commissioner , Internal Revenue Service
- Russell George, Treasury Inspector General, Tax Administration (TIGTA)
- Nina Olsen, National Taxpayer Advocate, Internal Revenue Service
- Jay Soled, Professor, Rutgers University
- Stephen Entin, President and Executive Director, IRET
- Jason Furman, Visiting Scholar, New York University
The hearing takes place at 2:30 p.m. in 342 Dirksen Senate Office Building.
In fiscal year 2005, Federal receipts totaled over $2.2 trillion. More than 95% of net receipts were collected by the IRS through its administration of the income, transfer and excise tax provisions of the Internal Revenue Code. The vast majority of these receipts is collected through our voluntary compliance system, under which taxpayers report and pay their taxes with no direct enforcement and minimal interaction with the government. The overall compliance rate achieved under this system is quite high. In 2001, the compliance rate was over 86%, after including late payments and recoveries from IRS enforcement activities. Nevertheless, an unacceptably large amount of the tax that should be paid every year is not, requiring compliant taxpayers to make up for the shortfall and giving rise to the “tax gap.”
The Administration is committed to working with Congress to reduce the tax gap. This document outlines the Administration’s aggressive strategy for addressing the tax gap. The strategy builds upon the current efforts of the Treasury Department and the IRS to improve compliance. As part of the deliberations in preparing the Administration’s fiscal year 2008 budget request to Congress, the Treasury Department and the IRS are working with the Office of Management and Budget to further develop this strategy to reduce the tax gap. This document is intended to provide a broad base on which to build. The more detailed elements of the tax gap strategy are, in part, contingent upon the budget process for fiscal year 2008 and beyond. Accordingly, the Treasury Department and the IRS will provide a more detailed outline of steps they will take to address the tax gap following release of the Administration’s fiscal year 2008 budget request early next year.