A new way to catch tax cheaters
It probably comes as no surprise that some Americans are not paying their fair share of taxes, either at the federal or state level. Some states are now so concerned about the rise of the ''underground economy'' - the whole substructure of financial transactions and exchanges of services that is not officially reported to tax officials - that they are slapping heavy fines on persons not fully complying with tax reporting and collection requirements. Meantime, noncompliance and cheating at the federal level have reached ''alarming levels,'' according to Internal Revenue Service Commissioner Roscoe Egger.
Guess what the total federal ''tax gap'' of uncollected revenues is for 1981 alone. Would you believe $95 billion, roughly the amount of the projected US budget deficit? The bulk of that, $87 billion, comes from unreported income from legal activities. The remainder comes from illegal activities such as drugs and prostitution.
Congress certainly has an obligation to ensure that those persons who owe taxes square their accounts as expeditiously as possible. Hence it should seriously consider enactment of a new tax collection bill now proposed by Senators Robert Dole and Charles Grassley. The bill would impose new financial penalties on cheaters; establish tightened reporting and information procedures; and provide additional funds for the IRS to improve its auditing and enforcement powers.
Honest taxpayers need not be concerned about granting the IRS such new powers. The IRS compliance rate for wage earners (in filing proper returns) is around 99 percent. The noncompliance area tends to involve such matters as dividends and interest, tips, private contract work, door-to-door sales, retail cash transactions, and professional fees, where employers or other parties seldom if ever file W-2 or informational documents. Take Treasury bills, for example. Currently, the US Treasury does not send a listing of T bills to the IRS, even though such instruments involve large amounts of money -- and interest payments. That would now be required under the Dole-Grassley bill.
The two senators plan to attach their legislation to the debt-ceiling bill in mid-April. The legislation would only bring in an additional $3 billion for fiscal year 1983. But the amounts would rise to $8 billion by fiscal 1984 and $9 .3 billion by fiscal 1985. For moral and financial reasons, the bill is worth support.