Any road to tax fairness in the U.S. will require more than President Joe Biden's early revenue proposals to Congress. Raising rates on top corporations and the wealthiest individuals may drive discussion for now, but enforcement and collection present a tougher federal quagmire.
The National Bureau of Economic Research found in a recent study that those in the nation's top 1% conceal as much as one-fifth of their income from tax collectors. And, the authors say, more than a quarter of this unreported income is hidden by "sophisticated evasion that goes undetected in random audits."
Operations at an ever-besieged Internal Revenue Service are drawing fresh attention in Washington. Unavoidable delays caused by the coronavirus pandemic have postponed the annual filing deadline for personal income tax forms. Unprocessed paper returns and jammed help lines are just the tip of the iceberg visible to the public.
Cracking down on outright evasion could be an expensive and complex venture. But during last year's presidential campaign, at a moment when the Democrats looked unlikely to win the Senate majority and change the rates, the Biden camp vowed to pursue big changes within the executive branch.
Biden economic adviser Jared Bernstein spoke then of "significant increases in IRS enforcement and auditing, particularly for those with complex business structures." The agency has weathered a decade of budget cuts and hiring freezes imposed by Republicans in Congress, it was noted at the time.
Revelations about how former President Donald Trump and his real-estate family minimized their tax bills have given Democrats a talking point on enforcement reform.
The large gap between what is owed and what is collected becomes part of the larger equality debate. Top earners, especially in certain types of partnerships and businesses, are not easily monitored, especially compared with wage earners whose pay and takeouts are automatically tracked through employers.
Late last year, the nonpartisan Congressional Budget Office said the IRS could increase collections by nearly $61 billion over 10 years if it were to invest a third of that in enforcement initiatives.
For the short term, any major changes at the IRS would fall to Commissioner Charles Rettig to carry out. A Trump pick for the job, Rettig came from a Beverly Hills law partnership known as a "controversy" firm that represents clients in battles with the IRS.
On March 18, Rettig testified before a House Ways and Means subcommittee: "Over the past two years, we have shifted significant examination resources and technology to increase our focus on high-income and high-wealth taxpayers." But experts are skeptical this effort ultimately will succeed in crushing tax evasion.
Sensational cases do surface. Last month, it was reported that billionaire Robert Brockman, accused of running the biggest tax-fraud scheme in U.S. history, donated generously to Republican groups that had yet to react to the charges filed in October. By itself, his prosecution is not expected to put a dent in America's tax evasion problem.