There’s a approach Biden can elevate extra of the wealthy with out paying increased taxes

Mr Biden could take administrative steps to shift enforcement priorities without the involvement of Congress, which involves the IRS’s use of technology and the recruitment and allocation of current workforce. For substantial new investments or enforcement measures, however, Congress would have to approve new funding.

It may be easier to get at least some Republican support for stronger efforts to enforce tax law than it is to raise tax rates. In particular, IRS commissioner Charles Rettig, a Trump appointee, has repeatedly urged more funding and outlined the need to reduce the tax gap, including for high earners.

Mr. Rossotti, the former IRS commissioner, said: “The idea is to prop up the system and make it fairer for everyone. It is unlikely that there will be any real size tax hike, but this is about keeping the tax system sound and raising money by enforcing taxes that are already on the books. “

The magnitude of the tax gap and its tendency toward higher-income Americans reflect not only a shrinking IRS enforcement budget, but a shift in how businesses are organized. President Trump’s own tax strategies, as reported by The Times earlier this year, provide an extreme example of the tactics responsible for billions in losses at the Treasury Department.

In the past generation, many American companies have moved from traditional “C” companies that owe corporation tax and years of auditing experience to “S” or “partnership” companies that pass their revenues on to individuals. who in turn pay individual income tax. But IRS enforcement has not kept pace with that shift, and partnerships and suburban companies are rarely scrutinized. Only 0.3 percent of them were in 2017.

A unique feature of these companies is that they have a single owner or a small group of partners so that their financial conduct is barely monitored from outside. Important financial information is not independently reported to the government, so they can hide information from their tax advisor or find someone who looks the other way.

Individuals who earn wages have their employers report this income to the IRS. And at the other extreme, while the largest corporations have aggressive strategies to reduce their corporate tax burdens, they have independent boards of directors and auditing firms whose reputations stand in the way of going underground.