The wealthiest people are shorting the government $150 billion every year, according to IRS Commissioner Danny Werfel.
Werfel, speaking to CNBC, accused the country’s millionaires and billionaires of creating a “lack of fairness” in the tax system. He blamed the tax collection gap on a lack of funding for audits on the very wealthy, noting that the most complicated tax returns require more resources.
“When I look at what we call our tax gap, which is the amount of money owed versus what is paid for, millionaires and billionaires that either don’t file or [are] underreporting their income are $150 billion of our tax gap,” Werfel said. “There is plenty of work to be done.”
“We have to make investments to make sure that — whether you’re a complicated filer who can afford to hire an army of lawyers and accountants or a more simple filer who has one income and takes the standard deduction — the IRS is equally able to determine what’s owed to us,” he said. “That’s a fairer system.”
The remarks come after Democrats boosted IRS funding. The Inflation Reduction Act, legislation that passed in 2022 without Republican support, included a controversial provision that allocated $80 billion in new funding to the IRS.
Republicans opposed the funding, saying it would drive up audits on the middle class. Democrats, meanwhile, argued that the funding would be used to close the tax gap by going after wealthy tax cheats and would be focused on those earning in excess of $400,000, offering a significant return on investment.
The Treasury Department said earlier this year that the IRS funding that was part of the Inflation Reduction Act will increase tax revenue by some $561 billion over the next decade, according to a new analysis.
In January, National Economic Council Director Lael Brainard said the analysis shows that the Biden administration’s investment in the IRS will “reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe.”
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“Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit,” she added.
Republicans have sought to claw back some of the $80 billion in IRS funding and were fiercely against that provision in the legislation. They have already succeeded in reducing some of the funding.