NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Shrinking the Tax Gap: Approaches and Revenue Potential

Natasha Sarin, Lawrence H. Summers

NBER Working Paper No. 26475
Issued in November 2019
NBER Program(s):Corporate Finance Program, Public Economics Program

Between 2020 and 2029, the IRS will fail to collect nearly $7.5 trillion of taxes it is due. It is not possible to calculate with precision how much of this “tax gap” could be collected. This paper offers a naïve approach. The analysis suggests that with feasible changes in policy, the IRS could aspire to shrink the tax gap by around 15 percent in the next decade—generating over $1 trillion in additional revenue by performing more audits (especially of high-income earners), increasing information reporting requirements, and investing in information technology. These investments will increase efficiency and are likely to be very progressive.

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Document Object Identifier (DOI): 10.3386/w26475

 
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