Shrinking the Tax Gap: Approaches and Revenue Potential

25 Pages Posted: 18 Nov 2019

See all articles by Natasha Sarin

Natasha Sarin

University of Pennsylvania Law School

Larry Summers

Harvard University

Date Written: November 2019

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.

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Suggested Citation

Sarin, Natasha and Summers, Larry, Shrinking the Tax Gap: Approaches and Revenue Potential (November 2019). NBER Working Paper No. w26475, Available at SSRN: https://ssrn.com/abstract=3488975

Natasha Sarin (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

Larry Summers

Harvard University ( email )

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