Sen. Crapo seeks clarification of tax gap estimates

Sen. Mike Crapo (R-ID) has forwarded correspondence to Internal Revenue Service (IRS) Commissioner Charles Rettig as a means of gaining clarification regarding tax gap estimates.

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The request for clarification stems from a recent Finance Committee hearing, during which Rettig speculated the tax gap, or the difference between what taxpayers owe and what they actually pay, could be $1 trillion or more.

Additionally, the $1 trillion estimate is above prior IRS estimates previously in the $450 billion range – based on tax data stemming from 2011-2013.

“While your testimony and writing makes clear that you are speculating about the $1 trillion figure, many have taken it as a factual data point,” Crapo wrote. “For Congress to make informed policy choices, it is of interest to learn about a decomposition of your aggregated tax-gap number. As you know, tax gap estimates have always drawn interest because there appear to be significant resources available from enhancing compliance. Yet, actually realizing those resources from enhanced IRS funding has not always proven easy or transparent.”

Per Crapo, in order for Congress to make informed policy choices, it is of interest to learn about a decomposition of the IRS’s aggregated tax-gap number.

Crapo requested answers by May 24 regarding how much of the possible $1 trillion tax gap is attributable to cryptocurrency holdings; how much of the possible $1 trillion tax gap is attributable to what reflects unreported or concealed income offshore and in pass-through entities; and how much of the possible $1 trillion current-year tax gap is attributable to growth in the dollar-value of the earlier estimated 2011-2013 net gap of $381 billion arising from asset and price growth since that earlier period.