Dear Commissioner Everson:
At a recent Senate hearing on the $345 billion annual tax gap, you testified that the Internal Revenue Service (IRS) could collect an additional $50-$100 billion each year without changing the way the Government interacts with the American taxpayer. You also stated a goal to raise the voluntary compliance rate from 83.5 percent to 85 percent by the year 2009.
I am very interested in closing the tax gap and would like more information on your strategy for reaching the goal you outlined last week. In addition, the Administration's FY '07 budget plan contains five legislative proposals aimed at closing the tax gap that are estimated to raise $3.5 billion over ten years, or $350 million per year. The Administration's FY '07 budget request for IRS is essentially flat after inflationary increases are taken into account. How does a flat budget with modest legislative proposals translate into the additional collections predicted last week? To what extent does IRS expect to achieve efficiency and productivity gains that would facilitate increased collections?Please provide a detailed analysis of your estimates and plans to close the tax gap. This analysis should identify the specific components of the tax gap that will be reduced and explain how the reduction will be accomplished. In addition, please indicate what actions that are not contingent on legislation can be instituted immediately.
I look forward to your response to my request by March 8, 2006. If you have any questions regarding this inquiry, please do not hesitate to contact me.
Sincerely yours,
Max Baucus Ranking Member, Senate Finance Committee
