The Tax Gap Gets Mentioned!!

Sen. John Breaux (D-LA) said that "instead of drilling for oil and gas, Exxon was drilling the tax code, looking for ways to find more and more tax shelters." Senator Grassley said that "what hit me the most was the moral fiber of the people involved," who he said displayed "unbridled greed and blatant disregard for the law of fairness." -- David Cay Johnston, Perfectly Legal, 2003

There is no law of fairness and moral fiber is irrelevant. Heck, morality is irrelevant and Grassley is a clueless dinosaur with way too much power. -- Germaine, 2021 

The net tax gap

Years ago I stumbled across the concept of a stealthy, quiet, never mentioned concept called the net tax gap. I remember it well. It was one of my milk curdling moments.  

But holy foschizzle! It was mentioned yesterday in passing on a business channel. Janet Yellen commented blandly that the current gap is running at $600 billion/year and she would take a look at it.

Translation: She will do nothing about it and could not care less.

Will miracles never cease? The tax gap is actually mentioned in public by someone with some real power. 

The net tax gap is a simple concept, but it is important. 

The magic math equation: The net tax gap = what is owed in taxes - what is paid in taxes. 

Translation into American: In non mathematical language, the gap is the difference between what is owed and what is paid.

So, if $1 trillion is owed to the US Treasury in taxes, but only $550 billion is paid, the net tax gap is $450 billion. That is $450 billion is what the US treasury is cheated out of and what us idiot honest taxpayers have to support in added federal debt financing. 

That's it. That's the whole shebang. My estimate (based on detailed IRS data and analysis for 2001 and 2006) put it at about $700 billion/year ± ~ $30 billion for 2021, while the last squeak the IRS made in public a few years ago was that it is only $400 billion/year at that time. I was more right than the IRS. The IRS was clearly lying about it due to threats from congress to really gut the agency if it didn't shut up and stopped bothering people about paying their taxes.

So there it is, tax cheats get to keep ~$400 billion/year (frightened IRS),  ~$600 billion/year (bland Yellin) or ~$700 billion/year (grumpy Germaine).

Fortunately for huge corporations, they buy and get lots of legal loopholes from sleazeballs in congress, so they don't have to cheat (as much). What a bunch of valiant patriots! HUZZAH!!

Yabut, waddabout the federal debt?

Glad you asked. Anyone in congress who complains about federal debt but blocks action on dealing with the tax gap, e.g., all most or republicans, is a liar. They do not care about the debt. They care about keeping politics corrupt and sleazy. They care far more about keeping tax cheats content and free to cheat than they do about stupid honest tax payers who do not cheat. 

That's two-party politics and business as usual. This sleaze and corruption has been going on for decades. The US Treasury has been cheated out of trillions, maybe about $10 trillion since 2000. That's almost a lot of money. Almost, but not enough to get congress jazzed about anything about it -- too many re-elections are at stake.

Hooray! I don't feel a thing.

Ouch