IRS chief cites progress toward closing tax gap

Internal Revenue Service Commissioner Mark Everson told the Senate Budget Committee Wednesday that the agency is making progress to close the $345 billion gap between taxes that are owed and what the agency collects.

Senate Budget Chairman Kent Conrad, D-N.D., expressed some consternation that the administration's proposals for closing the so-called tax gap would collect only a fraction of billions owed by individuals, small businesses and corporations.

"I commended you for what you've done, but let's deal with reality," Conrad said. "Tax avoidance is growing dramatically." He noted that the estimated $20 billion that could be recovered is less than 1 percent of the $2.4 trillion the IRS collects annually, and he lamented the slow progress.

Everson responded that the agency has to be careful to balance the need for compliance with additional burdens placed on taxpayers. "There are any number of things you could add to this [proposal], you just get more burdensome tradeoffs," he said.

The hearing focused on the president's fiscal 2008 budget for the IRS which requests $11.1 billion for the agency, a 4.7 percent increase over fiscal 2007.

Everson said he is satisfied with the president's request and declined when Conrad suggested that Congress should allocate an additional $250 million for the agency. "If you grow a budget too quickly, you lose control," Everson said.

The administration's budget request was accompanied by proposals for 16 pieces of legislation aimed at shrinking the tax gap.

Everson noted that budget increases alone would not be as effective in collecting the taxes owed without enacting the proposals for increasing compliance. He pointed to four proposals as a priority for Congress to pass: expand reporting of credit card transactions, require basis reporting on sales of securities, make failing to file a felony, and require e-filing for certain businesses.