Paul L. Caron

Monday, September 28, 2020

Sarin & Summers: Understanding The Revenue Potential Of Tax Compliance Investment

Natasha Sarin (Pennsylvania) & Lawrence H. Summers (Harvard), Understanding the Revenue Potential of Tax Compliance Investment:

In a July 2020 report, the Congressional Budget Office estimated that modest investments in the IRS would generate somewhere between $60 and $100 billion in additional revenue over a decade. This is qualitatively correct. But quantitatively, the revenue potential is much more significant than the CBO report suggests. We highlight five reasons for the CBO’s underestimation: 1) the scale of the investment in the IRS contemplated is modest and far short of sufficient even to return the IRS budget to 2011 levels; 2) the CBO contemplates a limited range of interventions, excluding entirely progress on information reporting and technological advancements; 3) the estimates assume rapidly diminishing returns to marginal increases in investment; 4) the estimates leave out the effect of increased enforcement on taxpayer decision-making; and 5) the use of the 10-year window means that the long-run benefits of increased enforcement are excluded.

We discuss these issues, present an alternative calculation, and conclude that a commitment to restoring tax compliance efforts to historical levels could generate over $1 trillion in the next decade.

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This the same Larry Summers that they tried to cancel?

Posted by: Anon | Sep 28, 2020 3:20:59 PM

Hah! Seeing the title, I thought it was going to be about the revenue potential of corporations investing in good tax lawyers.

Posted by: Eric B Rasmusen | Sep 28, 2020 3:44:12 PM