The Internal Revenue Service has been able to reduce a previous year’s tax gap and budget shortfall by 14.4 percent or $65 billion lowering that year’s budget deficit to $385 billion according to a recent IRS press release. Moreover, per Federal News Radio, the reason for such a large payment of back tax was under-reporting of taxes by small businesses, renters and property selling entities. In light of this, the tax system as it stands leaves enough leeway for businesses to escape taxes for quite some time per the audit information.
The White House itself has reported an estimated 2011 deficit of $1.7 trillion. Moreover, the difference between government receipts and outlays is expected be equal or similar to this amount. In 2006, the same chart shows a deficit of $434.49 billion, a difference of $15.51 billion from IRS data for the same year. CNN Money reports the actual amount of the 2006 deficit was $385.00 after the IRS performed audits. Even at that same 14.4 percent audit retrieval rate, the estimated 20011 deficit will still be $1.45 trillion. This indicates both an issue with the effectiveness of tax reporting requirements and tax revenue amounts.
Although audit data for latter years has not been released by the IRS, gross tax revenue information has and for 2010, that amount equaled $2.35 trillion per the 2010 IRS Data Book. Moreover, government outlays or expenditures for the same year are estimated to be $3.59 trillion per GPO Access, an amount that accounts for a deficit of approximately $1.24 trillion. Since the GPO Access statistics are recorded as an estimate, it is presumed the actual amount spent has not been officially added up. Additionally, if the current tax code does not allow for tax reforms that ameliorate tax gaps such as that reported by the IRS, additional tax collection shortfalls are a possible scenario in future tax years.
In a letter from the the honorable Kent Conrad, Chairman of the Committee on the Budget in the United States Senate, it is stated the majority of the increase in tax revenue from previous years was due from corporate taxes and not individual taxes. This is even more the case following the release of the IRS audit data. Although the Chairman of the Committee on the Budget does not explain why corporate revenue accounts for a larger portion of tax revenue, it does indicate that corporate wealth continued did rise relative to individual income tax revenue. Moreover, income disparity and growing national debt are implied observations.
The federal government does forecast a decrease in deficit spending to about $729 billion in 2012, however the actual amount could quite possibly differ. At any rate, deficit spending is an undeniable economic issue that is recognized by multiple departments of the government because it is unsustainable and adds to the national debt that Americans must pay. Differences of opinion exist with how to handle the debt. For example, according to the Heritage Foundation, the Democratic plan led by President Barack Obama calls for higher tax revenue up to 20 percent of GDP per the Heritage Foundation, whereas conservatives call for tax reform and spending cuts that do not weigh down economic growth.