Here's one suggestion for getting rid of that pesky $450 billion
federal budget deficit: Collect all the taxes that Americans owe.
"If we had 100 percent compliance with the tax laws, we would
probably be operating at break-even," says Donald Alexander, a
former Internal Revenue Service commissioner.
Mr. Alexander concedes that 100 percent compliance is impossible
to attain. Also, his estimate of noncompliance may be too high. The
IRS itself estimated that $232 billion in taxes were due in 1998 but
No one knows a really accurate sum. Congress, led by Republican
legislators, stopped the IRS from systematically measuring tax
compliance for all but working poor people after 1988.
Prior to then, thousands of representative taxpayers were put
through what one expert called "an audit from hell" to determine if
they had hidden income and had not paid their legal share of taxes.
The findings were used by the IRS to direct its compliance efforts
Whatever the actual number, uncollected tax revenues are huge.
Leonard Burman, a former Treasury official now at the Urban
Institute, told the House Ways and Means Committee July 17 that if
half of due taxes were collected over the next decade, Uncle Sam
would have an extra $1.7 trillion.
That sum would cover the entire cost of the 2001 and 2003 Bush
tax cuts, he figures. Or the money could eliminate more than two-
thirds of federal debt owed to the public. Or it could cover a cut
in all personal income-tax rates of more than 10 percent.
Tax evasion "undermines" the tax system, Mr. Burman testified.
"It is unfair.... And it feeds on itself, reducing respect for the
integrity of the tax system and leading to more cheating.... The
lost tax revenue inevitably means higher taxes on law-abiding
What could be significant is that deeper concern with uncollected
tax revenue and the related budget shortfall shows signs of becoming
"Maybe it is dawning on the Republicans that people have to pay
their taxes," Burman says.
Some Republicans - not all - have seemed to argue that tax
evasion may be OK because it lowers tax burdens and trims revenues
for bloated federal programs.
Burman noticed a shift in congressional sentiment between his
testimony before the House Budget Committee July 9 and the House
Ways and Means Committee a week later. Talk of IRS harassment of
taxpayers had turned to concern over lost tax revenues.
In that week, the White House's Office of Management and Budget
had boosted its budget-deficit estimate for fiscal 2003 to $455
billion from $304 billion estimated last February. That increase
meant one out of every three dollars Washington spends outside of
the self-funded Social Security system will be paid for by borrowing
- the highest share of on-budget spending financed by deficits since
World War II.
"The [Republican-controlled] House is beginning to be concerned
about it," says Alexander, who now works for a Washington law firm. …