IRS tax gap bill in progress by GOP as estimates are in doubt

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Republicans are working on ways to address the IRS’ tax gap after several powerful members of the party cast doubt on the estimates that have been floated.

Texas Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, told FOX Business the committee is working on legislation to address the tax gap by, first and foremost, getting an accurate reading of how much the agency does not collect from taxpayers each year.

"We are finalizing a bill that would address the tax gap by acquiring a true estimate – by taking input from the Joint Committee on Taxation to verify those tax gap estimates and requiring the IRS to work with Congress on a strategy to address it," Brady said.

During a hearing earlier this year, IRS Commissioner Charles Rettig said the tax gap may exceed $1 trillion per year, extrapolating based on the growth of cryptocurrencies, foreign-source income and other items.

The most recent analysis shows that the gross tax gap for tax years 2011 to 2013 is estimated at $441 billion.

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Brady noted that the estimates are based on projections and outdated data.

"Right now those numbers are just guesses, many of them from data that’s six or seven years old, studies that tend to guess at issues like cryptocurrency, foreign transactions and concealed income," Brady explained. "So there is no true estimate of it nor of the different segments that make up the tax gap. So let’s define the problem and then work together to solve that."

Sen. Mike Crapo, R-Idaho, who is the ranking member of the Senate Finance Committee, brought up similar concerns about the tax gap estimate earlier this year, as previously reported by FOX Business.

In a letter sent to Rettig in May, Crapo asked for clarification as to where the figure came from before Congress began making policy decisions based on it.

His office told FOX Business at the end of last month that it had still not gotten a satisfactory response regarding his request for more clarity on where the U.S. was losing out on the collection of lawfully due taxes.

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When asked where Brady would prioritize reforms within the IRS, he told FOX Business he would like to see the agency do better with the resources it has, including smarter auditing and better information gathering to target and win cases against taxpayers.

Secondly, he said he would like to see funds put toward customer service initiatives.

"Additional funds need to go to better customer service and getting their workers back in the office and responding quicker," Brady added.

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Closing the tax gap via increased IRS enforcement was one of the revenue-raising measures being considered by a group of bipartisan lawmakers seeking avenues to fund their infrastructure plan. The measure, however, broadly lost support among Republicans.

Sen. Joe Manchin, D-W.Va., said last month that IRS reform would be done, even if it had to pass in a standalone bill.

The bipartisan infrastructure plan does include a crackdown on cryptocurrency transactions, which is expected to raise $28 billion over the course of a decade. 

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