A proposal has been put forward to increase tax revenue. However, unlike most proposals to raise revenue, it would not do so by increasing taxes on anyone. Instead, it would raise revenue by reducing tax evasion, specifically by those with very high incomes (over $400,000).
As you may know, the government does not collect all the taxes that it is owed. This is because some people and businesses report less income than they owe according to the IRS, do not file tax returns at all, or claim more tax deductions and credits than they should.
It is estimated that every year the government does not collect about 15% of the taxes that it is owed. This is known as the tax gap. In 2019, the tax gap was estimated to be about $600 billion.
Over the last decade, the tax gap has increased. Some argue that this is a result of Congress reducing the IRS’ budget, which has caused the IRS to have less staff and resources to enforce tax laws, especially on those with very high incomes, as their taxes are more complicated.
As a result, audits and criminal tax evasion cases against very high-income individuals have declined by about 50%, and more than 100,000 high-income earners who have not filed their taxes are not investigated.