Closing Tax Gap Won't Fix Deficit, Though IRS Plans More Audits of Wealthy
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Closing the $688 billion tax gap won't solve the debt problem as the deficit is $1.7 trillion. Even perfect compliance would fall short.
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The tax gap has stayed at 2.3%-2.6% of GDP since 2014, showing taxes and economy grow together.
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Federal spending was 20%-30% of GDP from 2015-2021, much higher than the 16.4%-18.3% tax collection rate.
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At 86.3%, the US has a high voluntary compliance rate. More enforcement may burden responsible taxpayers.
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The IRS plans to increase audits of high-income taxpayers, but we must be realistic about the tax gap's deficit reduction potential.