The Treasury Department released a report on Wednesday that shows how the top 1% of earners in the U.S. are dodging $168 billion in taxes annually. With this finding, the department says it is necessary to inject new funding into the Internal Revenue Service (IRS) to fill what it terms as the “tax gap.”

The Treasury report, authored by deputy assistant secretary for microeconomics Natasha Sarin, says that filling the tax gap with enhanced IRS enforcement will advance President Joe Biden's ambitions for a more equitable economy. The report emphasizes this goal by saying the goal is not about using increased enforcement on lower-income taxpayers, who it shows are less likely to misreport their earnings.

According to its findings, the difference in taxes owed and collected is $600 billion annually in unreported taxation and $7 trillion of lost revenue across the next decade. In order to begin increasing compliance from the top, the Treasury highlights the need for new IRS personnel, training and access to information on opaque income sources used to evade taxation.

"The administration’s proposals call for significantly increasing the IRS budget, specifically $80 billion of investment over the coming 10 years in enforcement, IT, and taxpayer services generating an estimated $320 billion in additional tax collections over the next 10 years," Sarin wrote.

“To further ensure that everyone pays their fair share, the administration also calls for using information that financial institutions already possess ... so the IRS can deploy these additional resources to audit more sophisticated tax evaders,” she continued, adding that this would not create any additional burdens on U.S. taxpayers “whatsoever.”

If the administration’s plans for an IRS overhaul in the next decade proceed, the Treasury’s report suggests that the reward would be $1.6 trillion in additional tax revenue, just from improved collection of the taxes that are already due.

Increased funding for the IRS has been championed by the Biden administration but opposed by the Republicans. GOP lawmakers warn that increased IRS enforcement under the current proposals violates the privacy of those it will be scrutinizing. Democrats are including more IRS funding into their massive $3.5 trillion spending bill, which they hope to pass over Republican objections through the budget reconciliation process.

How much money is collected by the proposed increase to IRS funding is also debatable. In a separate analysis issued on Sept. 2 by the Congressional Budget Office (CBO), it found that the administration’s crackdown on tax evasion by top earners would increase revenues by approximately $200 billion over a decade, a far cry from the $1.6 trillion the Treasury projects will be collected.

However, the CBO analysis did not include changes in revenues resulting from portions of the proposal that involve new information-reporting requirements. This is included in the Treasury’s report which estimates $460 billion in new revenue will be collected by reporting requirements alone.

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