Focus on the Tax 'Avoidance' Gap

Publication Date: September 2009

Publisher: Tax Policy Center

Author(s): Eric Toder

Research Area: Banking and finance

Keywords: Fiscal future; General Tax Policy; Tax Reform

Type: Report


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.