Paul L. Caron
Dean



Thursday, September 17, 2020

Bi-Annual Taxes: A Simple Solution to Rising Tax Non-Compliance, Shrinking IRS Budgets, And Increasing Taxpayer Burden

Jeffrey A. Dubin (MIT) & Emma Cockerell (USC), Bi-Annual Taxes – A Simple Solution to Rising Tax Non-Compliance, Shrinking IRS Budgets, and Increasing Taxpayer Burden:

Each year, individual tax non-compliance results in billions of dollars of lost tax revenue. While the Internal Revenue Service (IRS) conducts examinations of select returns, the audit rate has fallen precipitously in past decades.

MIT 3

Meanwhile, the number of individual returns has grown and return complexity has risen. Individuals face a dauntingly complex tax code that requires the assistance of paid preparers. More than ever, the IRS experiences greater demands for assistance from taxpayers but fewer resources to fulfill these demands. Instead of the oft-proposed IRS budget increase, we propose a simple and pragmatic, but transformative, solution: the bi-annual filing and collection of taxes, which would minimize taxpayer and paperwork burdens, free up IRS funding, and result in a de facto doubling of the audit rate.

In aggregate, the plan is estimated to save $74 – $83 billion for the IRS and the American public.

https://taxprof.typepad.com/taxprof_blog/2020/09/bi-annual-taxes-a-simple-solution-to-rising-tax-non-compliance-shrinking-irs-budgets-and-increasing-.html

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Comments

I believe it was Mark Twain that said "for every problem there is a solution that is simple, neat—and wrong". This paper perfectly encapsulates that sentiment.

Posted by: Kim M Bloomquist | Sep 18, 2020 10:19:12 PM

I reject the claim that tax non-compliance has been rising. I cite the IRS which calculates the "tax gap" which concluded that tax compliance remained very stable at 82-84% between 2001 and 2013:

https://www.irs.gov/pub/irs-pdf/p1415.pdf

Might even have improved with the Trump tax law changes. But there is no evidence of increasing tax non-compliance. Could be better than 84%, sure, but compared to most other industrialized countries, America has very high marks in tax compliance, period.

Posted by: MM Classic | Sep 19, 2020 1:20:24 PM

A bigger problem is the tax gap, estimated at almost half a trillion a year. IRS collection efforts are hampered by red tape and cumbersome procedure. i.e. the ability to do enforced collection (seizures and compliance checks) are a fraction of what they were 30 years ago.

Posted by: Smitty | Sep 21, 2020 7:31:48 AM

Smitty: As I linked to, the tax gap hasn't changed over a 15 year period. It's pretty small, actually, compared to total collections.

Show me where it was better in the past, and then I'll accept the argument.

Posted by: MM Classic | Sep 21, 2020 6:52:49 PM

Not Mark Twain but H.L. Menken

Posted by: Robert Weinberger | Sep 22, 2020 8:54:17 AM