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Focus on the Tax 'Avoidance' Gap

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Publication Date: September 2009

Publisher(s): Tax Policy Center

Author(s): Eric Toder

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Banking and finance (Taxation and tax policy)

Keywords: Fiscal future; General Tax Policy; Tax Reform

Type: Report

Abstract:

President Obama's tax reform task force has been asked to propose ways to close the $300 billion tax gap, which is the estimated difference between taxes owed and taxes paid either voluntarily or through enforcement. But the amount of money lost to legal tax avoidance - the difference between an income tax without special tax preferences and taxes under current law - at least double that lost to outright evasion. The perpetrators of this second, "avoidance" tax gap are legislators, not taxpayers. The panel's main focus should be on finding appropriate ways to close this second tax gap.