It’s been said that the most feared three letters in the United States are “IRS.” Even my own heart has skipped a few beats on the occasions I have received routine correspondence from the agency, and I spent almost three decades working at the highest levels of its Criminal Investigation Division. Over the past decade, however, the agency lacked the resources it needed to strike fear into the hearts of those seeking to evade tax laws. And as funding waned, so did enforcement.
Encouragingly, the Biden administration plans to increase the IRS budget by $80 billion over the next 10 years. But it will take far more than a dramatic one-time infusion of money to cure what ails the nation’s revenue arm. Between 2010 and 2019, according to the IRS Data Book, the agency’s budget dropped from $14.6 billion to $11.5 billion, and its workforce dropped from approximately 94,000 employees to 73,000 — all while the economy roared on and generated enormous wealth. Starving the IRS of funding was shortsighted, hurting the entire country.
The U.S. tax gap — the difference between what people owe under the law and what they actually pay — could be as large as $1 trillion dollars, according to recent testimony by IRS Commissioner Charles Rettig. While the IRS has not issued a tax gap analysis in about 10 years, it’s not a far reach to get there from the most recent gap of $441 billion: As Rettig pointed out, the last analysis didn’t include virtual currencies, and their market value is now more than $2 trillion dollars — just one area of potential noncompliance that the IRS says contributes to a growing problem.
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