September 2, 2014

Unpaid Taxes Worsen Federal Budget Picture

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...

The IRS recently estimated that 318,000 federal workers and retirees owe the government more than $3.3 billion in back taxes. That includes hundreds who work for Congress or in the federal courts, and 36 who work at the White House or related agencies.

These 318,000 delinquent taxpayers constitute 3.3 percent of the federal workforce and federal retirees. But federal workers are hardly the only problem; the IRS estimates the comparable figure for the general population is at least 8.7 percent.

Two years ago the IRS released its most recent estimate of the “tax gap,” which is the amount of total tax liabilities that are not paid on time. The agency said then that the gross tax gap for 2006 was $450 billion. Enforcement efforts and late payments dropped that figure to a net tax gap of $385 billion.

These statistics underscore the need for stronger enforcement of the tax code. The government can hardly afford to let some taxpayers off the hook. Nor is that fair to law-abiding citizens.

Congress should also reform and simplify the tax code, which is riddled with countless special subsidies for individuals, businesses and industries that undermine its public legitimacy. The complexity also makes it difficult both for taxpayers to determine what they owe and for the IRS to explain and enforce the laws.