In summary, the IRS estimates that Americans “voluntarily” and on-time cough up 81.7% of what is due, and the agency successfully shakes down the reluctant for an additional 2%, leaving 16.3% uncollected.
The agency says that although the gross (voluntary/on-time) and net (total) tax gaps rose 1.8% and 5.5% respectively from those reported in the previous estimate, this does not in their opinion indicate that noncompliance is increasing and the tax gap is growing larger. Instead, they say “improvements in the accuracy and comprehensiveness of the estimates” is to blame, which is another way of saying the earlier estimates were probably too low and should be retrospectively increased.
Here is some data on where the agency thinks the missing money is hiding:
|component of gross tax gap||average annual amount||as a percent of the total|
|source of gross tax gap||average annual amount||as a percent of the total|
|individual income tax||$319 billion||69.7%|
|corporate income tax||$44 billion||9.6%|
|employment tax||$91 billion||19.9%|
|estate/excise taxes||$4 billion||0.9%|
|source of net tax gap||average annual amount||as a percent of the total|
|individual income tax||$291 billion||71.7%|
|corporate income tax||$35 billion||8.6%|
|employment tax||$79 billion||19.5%|
|estate/excise taxes||$1 billion||0.2%|
I haven’t seen the complete report, only a summary, so I haven’t learned much, and I don’t know which of their method changes resulted in the higher estimates — or whether their claim that there was no underlying change in taxpayer behavior is plausible.