How Funding the IRS Can Help Close the Tax Gap By Making the Wealthy Pay What They Owe
For decades, rich tax cheats have taken advantage of our weakened IRS. Let’s put an end to their illegal tax evasion.
By Noah Streng
The top 1% of Americans hold 15 times more wealth than the bottom 50% combined, and since the pandemic hit, US billionaires have increased their wealth by $1.8 trillion. Meanwhile, millions of working-class Americans have lost their jobs and have sunk into poverty because of the pandemic. That’s why it is more important than ever that we have a tax system that works for working people and does not pamper the rich.
How is it possible that just a few people have so much wealth while so many Americans are suffering? Senator Sheldon Whitehouse (D-RI) argues that this massive increase in wealth inequality is due to decades of IRS defunding by Republicans, allowing corporations and the ultra-wealthy to get away without paying their fair share of taxes.
A Senate Subcommittee on Taxation and IRS Oversight hearing titled “Closing the Tax Gap: Lost Revenue from Noncompliance and the Role of Offshore Tax Evasion” demonstrated the desperate need for robust IRS funding. Some studies suggest that the United States is losing around $600 billion per year in unpaid taxes. Because of our broken tax system, which is designed to benefit the ultra-wealthy, much of this unreported income comes from the fact that the rich are infrequently audited. As a result of nearly $3 billion in budget cuts over the past decade, the IRS has lost tens of thousands of employees and now lacks the tools it needs to effectively ensure that the most powerful and wealthy in our society are paying their fair share of taxes.
These budget cuts have opened the door for corporations and the ultra-wealthy to further enrich themselves at a time where nearly 11 million children in the US live in poverty. A paper by IRS researchers and National Bureau of Economic Research academics estimates that the top 1% of Americans fail to report about 21% of their income. Meanwhile, low-income Americans who receive the Earned Income Tax Credit (EITC) are now being audited by the IRS at the same rate as the richest 1% of Americans. Much of this is because the IRS is understaffed and relies on outdated technology to carry out its audits.
To combat skyrocketing wealth inequality, Congress and the Biden administration should prioritize securing multi-year funding for the IRS to modernize its technology and hire the staff it needs to ensure the ultra-wealthy pay what they owe. Former IRS Commissioner’s Charles Rossotti and Fred Goldberg argue that robust IRS funding and increased enforcement tools could raise more than $1.4 trillion in revenue over the next ten years. Instead of collecting dust in the vaults of the ultra-wealthy, this money should be spent on healthcare, education, and other public services to increase the quality of life of all Americans. To help close the tax gap, the IRS should prioritize audits on corporations and the wealthy who are using their power to avoid paying their fair share of taxes.
Standing up to corporate America and the billionaire class will require millions of working-class people to unite and organize for a more just, humane society. That’s why we need YOU to get engaged in the fight to ensure the IRS has the resources it needs to stop tax cheats! Sign this petition if you’re ready to lend your voice to the fight for social and economic justice. Together, we can build a better world.