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Tuesday, Dec. 15, 2020

Does $400 billion in federal taxes go uncollected each year?

Austin Tannenbaum, Gigafact
yes

The Internal Revenue Service reports that between 2006 and 2013, the most recent period for which data is available, the U.S. government's “tax gap”—the disparity between the taxes the government is owed and the taxes it actually collects—was approximately $400 billion a year.

That sum compares to total income tax collections in 2017 of $1.6 trillion. The bottom 90% of earners paid about $480 billion of that.

Economists Aaron Krupkin and William G. Gale note that one of every six dollars owed in federal taxes goes unpaid and that the gap by 2018 was “plausibly” 70% to 80% of the annual federal budget deficit. They attribute the gap to inadequate funding for tax enforcement agencies, which “could do far more if they had the resources,” and suggest it reflects a fundamental unfairness in the U.S. tax system, given that high earners evade taxes more frequently than middle and low earners.

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