Denitsa Tsekova of Yahoo Finance explains how President Biden’s administration seeks to close the tax gap in the United States.
ADAM SHAPIRO: Over the next two weeks, you’re going to hear a lot of debate in Washington on how to pay for the President’s spending plans. Democrats plan to step up IRS crackdowns to tax the rich. It’s much more complicated than that.
So, to help us understand how the Biden administration could close the tax gap, let’s call on our colleague, Yahoo Finance Live correspondent Denitsa Tsekova. It’s good to see you here. How are they going to do it?
DENITSA TSEKOVA: Well, there are two big revenue generators for this plan that is going through Congress right now. The first is additional funding for the IRS and the second is additional information for financial institutions. So what we’re hearing is that those two provisions alone were supposed to generate $ 700 billion in revenue over 10 years, but we’re getting different numbers, at least for the first part of the plan. We actually get lower income estimates from the Congressional Budget Office.
The first part of the plan is the IRS funding which will be used for the application and is particularly aimed at high income individuals and businesses. The funding will be used to improve technology, compliance and use to also hire and train auditors to work on these more complex investigations. And then the second part we talked about, which will require banks and financial institutions to report the inflows and outflows of the taxpayer’s account annually. And that will give the IRS additional information on income, business expenses and things like that, so they can better target their audits. But what we’re hearing from experts is that the additional funding for the IRS will most likely be built into the final package, while the additional reporting requirements we talked about might face more opposition and not. be included in the final package.
– Well Denitsa, what’s interesting here is that we see conflicting reports only in terms of official estimates from the Biden administration and comparing what we hear from the CBO. I guess, break down for us the estimates that exist and the exact difference we’re seeing between some of them.
DENITSA TSEKOVA: Yes, so what we saw from Biden and the Treasury Department a few days ago is that the additional IRS funding will generate $ 320 billion in additional tax revenue over 10 years, but only the recent report from the Congressional Budget Office estimates that the figure will actually be $ 200 billion, so much less. And the second part of the plan that actually generates more revenue has yet to be evaluated by the CBO, but what we are hearing from experts is that we could see a similar trend, that the actual number could be less than what we’re hearing from the Biden administration and the Treasury Department, which may complicate matters in Congress as the package continues to be debated and finalized.