by Tens of millions of Americans will duly pay the taxes they owe and file for their refunds by Tax Day in 2021, which was delayed until May 17. Meanwhile, some of the wealthiest Americans will engage in complicated tax evasion schemes that will cost the U.S. government 0 billion this year, according to U.S. Treasury Secretary Janet Yellen.Tax evasion has reached such heights that the Biden administration is proposing bold measures to crack down on rich tax cheats. And academic research is leading the way in exposing the schemes and frauds that the rich use to evade taxes and how to close the so-called tax gap. The tax gap is the difference between what taxpayers owe to the IRS and what is actually paid. Because unreported or hidden income cannot be directly observed, academic research
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Tens of millions of Americans will duly pay the taxes they owe and file for their refunds by Tax Day in 2021, which was delayed until May 17. Meanwhile, some of the wealthiest Americans will engage in complicated tax evasion schemes that will cost the U.S. government $700 billion this year, according to U.S. Treasury Secretary Janet Yellen.Tax evasion has reached such heights that the Biden administration is proposing bold measures to crack down on rich tax cheats. And academic research is leading the way in exposing the schemes and frauds that the rich use to evade taxes and how to close the so-called tax gap.
The tax gap is the difference between what taxpayers owe to the IRS and what is actually paid. Because unreported or hidden income cannot be directly observed, academic research is key in documenting the sources and size of the tax gap. For instance, Natasha Sarin, now at the U.S. Department of the Treasury, and Larry Summers at the Harvard Kennedy School of Government corroborate Secretary Yellen’s assertion that the tax gap is about $700 billion this year and outline many steps to close it.
This issue brief examines the following factors that help determine the size of the tax gap: