Newspaper article THE JOURNAL RECORD
Only 83.2% of Federal Income Taxes Paid Voluntary in '87
WASHINGTON - Individuals and businesses voluntarily paid only 83.2 percent of the federal income taxes they owed last year, leaving the government with a tax gap of $84.9 billion, the Internal Revenue Service said Thursday.
More than half the shortage was attributed to individuals who file tax returns but fail to report income from moonlighting, a small business or other legal non-wage sources.
IRS Commissioner Lawrence B. Gibbs said closing the gap may require a basic change of attitude among taxpayers in much the same way, he said, that they came to consider drunken driving unacceptable.
``I think in this country we still have an attitude ... (that) it's socially acceptable to cut a corner here and there'' on taxes, Gibbs told the U.S. House of Representatives Ways and Means oversight subcommittee.
``We are going to destroy the system'' unless a way is found to ensure that everyone pays a fair share, said Rep. J.J. Pickle, D-Texas, chairman of the subcommittee.
Pickle said the IRS estimate is understated, even for legal income. He noted the IRS made no effort to estimate the tax loss from narcotics, prostitution and other illegal sources of income.
As serious a problem as the $84.9 billion gap represents, Gibbs said, there was good news:
- The 1987 gap is $30 billion less than the IRS forecast in 1983 that it would be. Gibbs attributed the decline to new tax laws, improved data collection, lower estimates of cheating on tips and capital gains, and a decision not to count $7 billion in taxes that were acknowledged but not paid.
- The rate of voluntary compliance, which had dropped to 81.1 percent in 1986, rose last year to 83.2 percent, virtually the same level as 1973. Gibbs said compliance by individuals and corporations is expected to continue rising through 1992, but still remain below 85 percent.
Because of a growing economy and inflation, the dollar amount of the tax gap will keep going up, Gibbs said. The gap, which totaled $28 billion in 1973, is expected to climb to $87 billion this year and almost $114 billion in 1992.
The tax gap includes money that eventually may be collected by IRS enforcement procedures. The IRS collected about $475 billion in corporate and individual income taxes last year. …