But it’s unclear exactly how much could be raised and how much it would cost to increase enforcement. Here’s how it could work:
The difference between taxes owed by law and the amount actually paid to the IRS — known as the “tax gap” — could fall somewhere in the range of $381 billion to $1 trillion annually.
But that’s based on tax years 2011, 2012, and 2013 and IRS Commissioner Chuck Rettig told lawmakers earlier this year that he believes the tax gap could be much bigger now — up to a massive $1 trillion a year.
How much more can actually be collected?
It’s unlikely the IRS will ever be able to get the tax gap down to zero, no matter how much it ramps up enforcement.
The agreement struck between a bipartisan group of senators and the White House indicates that they believe another $100 billion could be collected over 10 years — and they plan to use that money to help fund investments in infrastructure.
Who’s not paying?
The tax gap sheds light on how some people and businesses aren’t paying their fair share. But it’s not entirely the result of bad actors trying to evade the tax man. Inadvertent error accounts for some of it, too.
Can the IRS catch up?
The agency is strapped for cash and will need a bigger budget to hire more staff if it wants to close the tax gap.
Its budget has shrunk 20% over the past decade, resulting in a 22% staff reduction. With fewer people working on enforcement, the share of individual income tax returns it examined fell by 46%, and the share of corporate income tax returns it examined fell by 37% between 2010 and 2018, according to the Congressional Budget Office.
The agency became even more burdened during the pandemic, when many of its employees were sent to work from home while Congress added to its workload by tasking the IRS with distributing three rounds of stimulus payments and the new, expanded child tax credit.