Working Paper: NBER ID: w26475
Authors: Natasha Sarin; Lawrence H. Summers
Abstract: Between 2020 and 2029, the IRS will fail to collect nearly $7.5 trillion of taxes it is due. It is not possible to calculate with precision how much of this “tax gap” could be collected. This paper offers a naïve approach. The analysis suggests that with feasible changes in policy, the IRS could aspire to shrink the tax gap by around 15 percent in the next decade—generating over $1 trillion in additional revenue by performing more audits (especially of high-income earners), increasing information reporting requirements, and investing in information technology. These investments will increase efficiency and are likely to be very progressive.
Keywords: No keywords provided
JEL Codes: H0; H2; H26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing audit rates (M42) | Enhancing revenue collection (H26) |
| Decreased audit rates for high-income individuals (H26) | Revenue losses (H29) |
| Enhancing information reporting requirements (G38) | Reducing underreporting (C83) |
| Investing in technology (O39) | Improving IRS efficiency (H26) |
| Improving IRS efficiency (H26) | Increasing revenue collection (H26) |
| Proposed policy changes (R28) | Significant reduction in the tax gap (H26) |
| Reducing the tax gap (H26) | Additional revenue generation (H27) |