Paul L. Caron

Monday, November 25, 2019

Summers & Sarin: Funding The IRS Should Be The First Step In Tax Reform

Washington Post op-ed:  Yes, Our Tax System Needs Reform. Let’s Start With This First Step, by Lawrence H. Summers (Harvard) & Natasha Sarin (Pennsylvania):

While there’s plenty of disagreement about how the money should be used, almost everyone involved in public-policy debates agrees that it would be good if the federal government could collect more revenue without raising tax rates or reducing tax deductions or credits.

It should be indisputable that investment to make sure all citizens meet their tax obligations is desirable. Such investment would raise substantial revenue, as well as increase economic efficiency and help redress growing inequality: Our rough estimates suggest that at least 70 percent of the “tax gap”— defined as owed but uncollected taxes — comes from underpayment by the top 1 percent. This contributes to legitimate concerns that our tax system unfairly advantages the elite.

Our new analysis [Shrinking the Tax Gap: Approaches And Revenue Potential] suggests that better-focused audits, raising Internal Revenue Service enforcement to previous peak levels, investing in information technology and broadening earnings reporting could raise more than $1 trillion in the next decade, primarily from very high-income taxpayers. This well exceeds the revenue benefit of raising the top individual rate to 70 percent. ...

Restoring the IRS budget would, we believe, pay for itself many times over. It would also create a more progressive tax regime: At a time when working people pay their taxes in full, because of withholding, it would be reassuring for the tax law to be equally well-enforced on high-income earners.

Assuring compliance to the maximum extent feasible is not where tax reform should end, given the many problems with the current system and our need for significantly greater revenue. But it is where it should begin.

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