Sen. Carper Introduces Taxpayer Advocacy Bill

Legislation would reduce federal budget deficits and reduce compliance burdens for taxpayers

WASHINGTON – Today, Sen. Tom Carper (D-Del.), a member of the Senate Finance Committee and the Chair of the Senate Subcommittee that oversees Federal Financial Management, introduced legislation aimed at reducing record federal budget deficits while lowering tax compliance burdens on law-abiding taxpayers. The Taxpayer Advocacy and Government Accountability Promotion (TAX GAP) Act, which builds on similar legislation introduced last year, promotes fiscal responsibility and taxpayer fairness, while cracking down on delinquent taxpayers. Sen. Barbara Boxer (D-Calif.) is a cosponsor of Sen. Carper’s bill.

In 2001, the last year the Internal Revenue Service estimated the “tax gap” — the difference between what taxpayers owe and what they actually pay — the figure stood at $345 billion, or $290 billion after subtracting subsequent enforcement efforts and late payments. Despite some recent successes in improving tax compliance, the tax gap has certainly grown since 2001. Most of the tax gap is caused by taxpayers who deliberately or accidentally underreport their taxable income.

“Reducing the tax gap is a common-sense approach to combating our nation’s ballooning debt,” said Sen. Carper. “As we work on developing a culture of thrift within our government, it makes sense to go after the low-hanging fruit first. Most Americans pay their taxes properly and on-time. However, those who fail to pay their fair share not only create a burden that our economy simply cannot sustain, but they force their fellow Americans who play by the rules to pay more in taxes. My bill takes the necessary steps to cracking down on lawbreakers, which will lower costs for law-abiding Americans while reducing our deficit.”

The overwhelming majority of Americans comply with tax laws. However, because a limited number of taxpayers shortchange the Treasury, they deprive the nation of sufficient funds to pay for everything from national defense to education to Social Security — ultimately increasing the deficit and, in the long run, making everyone else’s tax rates higher than necessary.

To reduce the unfair burden of higher deficits and higher taxes on law-abiding taxpayers, the TAX GAP Act cracks down on noncompliant filers by enacting more than a dozen provisions to improve tax forms, enhance reporting, improve tax administration, and reduce tax avoidance by government contractors. The bill also curbs scams involving prison inmates who illegally claim tax refunds, by requiring prisons in the U.S. to provide critical information each year that will enable the IRS to quickly identify cases of tax fraud.

The bill includes a number simplification provisions making it easier for families and businesses to make tax payments. The TAX GAP Act also strengthens online filing requirements in order to reduce paperwork costs, and also requires the IRS to examine ways to simplify tax forms and reduce the burdens of filling out tax forms, particularly for small businesses. Provisions in the legislation are expected to enable the IRS to improve its data matching and auditing systems to more quickly identify noncompliant taxpayers, which will result in fewer taxpayers being subjected to unnecessary audits.

The TAX GAP includes provisions that have been proposed both by President Obama as well as former President Bush in their annual budgets, and also incorporates a range of new proposals — all of which will reduce the tax gap while avoiding undue burdens on law-abiding taxpayers.