IRS chief: Tax cheats cost the U.S. $1T annually
The United States is losing approximately $1 trillion in unpaid taxes every year, Charles Rettig, the Internal Revenue Service commissioner, estimated Tuesday, arguing that the agency lacks the resources to catch tax cheats.
The so-called tax gap has surged in the past decade. The last official estimate from the IRS was that an average of $441 billion per year went unpaid from 2011 to 2013. Most of the unpaid taxes are the result of evasion by the wealthy and large corporations, Rettig said.
“We do get outgunned,” Rettig said during a Senate Finance Committee hearing on the upcoming tax season.
Sen. Ron Wyden, D-ore., chairman of the committee, called the $1 trillion tax gap a “jaw-dropping figure.”
“The fact is that nurses and firefighters have to pay with every paycheck, and so many highfliers can get off,” Wyden said.
Rettig attributed the growing tax gap to the rise of the $2 trillion cryptocurrency sector, which remains lightly regulated and has been an avenue for tax avoidance. He also pointed to foreignsource income and companies' abuse of pass-through provisions in the tax code.
The size of the IRS enforcement division has declined sharply in recent years, Rettig said, with its ranks falling by 17,000 over the past decade.
The spending proposal that the Biden administration released last week asked for a 10.4 percent increase above current funding levels for the tax collection agency, to $13.2 billion. The additional money would go toward increased oversight of tax returns of high-income individuals and companies and to improve customer service at the IRS.
Rettig said that an extra $1 billion for enforcement could let the IRS hire 4,875 front-line audit personnel and update computer systems to help identify fraud and tax evasion. He said rebuilding the agency's auditing capability will be a multi-year process.
The IRS last month extended the tax filing deadline to May 17 from the traditional April 15, bowing to pressure from lawmakers and tax professionals.