University of Pennsylvania
3501 Sansom Street
Philadelphia, PA 19104
Institutional Affiliation: University of Pennsylvania
NBER Working Papers and Publications
|November 2019||Shrinking the Tax Gap: Approaches and Revenue Potential|
with Lawrence H. Summers: w26475
Between 2020 and 2029, the IRS will fail to collect nearly $7.5 trillion of taxes it is due. It is not possible to calculate with precision how much of this “tax gap” could be collected. This paper offers a naïve approach. The analysis suggests that with feasible changes in policy, the IRS could aspire to shrink the tax gap by around 15 percent in the next decade—generating over $1 trillion in additional revenue by performing more audits (especially of high-income earners), increasing information reporting requirements, and investing in information technology. These investments will increase efficiency and are likely to be very progressive.