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Shrinking the Tax Gap: Approaches and Revenue Potential

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  • Natasha Sarin
  • Lawrence H. Summers

Abstract

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.

Suggested Citation

  • Natasha Sarin & Lawrence H. Summers, 2019. "Shrinking the Tax Gap: Approaches and Revenue Potential," NBER Working Papers 26475, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26475
    Note: CF PE
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    Cited by:

    1. Arun Advani, 2022. "Who does and doesn't pay taxes?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 5-22, March.
    2. Xuantong Wang & James Hopeward & Ilcheong Yi & Mark W. McElroy & Paul C. Sutton, 2022. "Supporting the Sustainable Development Goals: A context sensitive indicator for sustainable use of water at the facility level," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(5), pages 1184-1199, October.
    3. Andrew Feltenstein & Jorge Martinez-Vazquez & Biplab Datta & Sohani Fatehin, 2022. "A general equilibrium model of Value Added Tax evasion: an application to Pakistan," International Economics and Economic Policy, Springer, vol. 19(3), pages 537-556, July.
    4. Gamannossi degl’Innocenti, Duccio & Levaggi, Rosella & Menoncin, Francesco, 2022. "Tax avoidance and evasion in a dynamic setting," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 443-456.
    5. David Gstrein & Elena Herold & Florian Neumeier, 2022. "Entwicklung eines Bottom-up Ansatzes zur Messung der Unternehmensteuerlücke (Corporate Income Tax Gap) in Deutschland mit Fokus auf die benötigten Datengrundlagen," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number bericht, October.

    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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