Tax Gap Hits $100 Billion
THE gap between federal income taxes owed and paid voluntarily is expected to swell to $100 billion this year and to as high as $127 billion two years from now. That does not include uncounted billions more taxes owed on income from illegal sources. The current compliance rate of about 83 percent is not good enough for Congress, which is interested in any way to reduce the budget deficit, or for the Internal Revenue Service, which is concerned that more Americans will join the ranks of tax cheats if they see evidence that others are getting away with it.
The latest IRS analysis indicates that businesses are responsible for more than 60 percent of the gap. The worst offenders are one-owner businesses and ``informal suppliers,'' the IRS's designation for sellers - child-care providers, home repairmen, and roadside vendors, for example - who usually deal in cash and seldom maintain a regular place of business.
Lawmakers, IRS officials, and nongovernment experts agree on the problems. Few tax returns are audited. Few people go to jail for cheating. And the IRS has been hit by budget cuts while trying to cope with a high turnover rate and outdated computers.
President Bush's IRS budget for 1991, up $635 million to $6.1 billion, would continue the computer modernization and pay for more auditors and collectors and further improvements in taxpayer services. But the National Treasury Employees Union, which represents IRS workers, says the percentage of returns audited would drop and the total of unpaid accounts would rise under Bush's budget.