More spending, taxes is ‘No. 1 threat’ to economic growth: Expert
Michael Lee Strategy founder Michael Lee provides insight into how Biden’s economic policy can impact the economy and markets.
U.S. Treasury Secretary Janet Yellen said on Wednesday that if the IRS were funded appropriately and therefore able to crack down on tax cheats, the U.S. would be able to collect more revenue without raising taxes.
“The tax gap is huge, and I think we would have a fairer tax system and collect more tax revenue without the need to raise rates if we resourced the IRS properly to be able to address this issue,” Yellen said during testimony before the Senate.
Yellen noted that the tax gap – known as the difference between what the IRS is owed and what it will collect – is estimated at $7.5 trillion over the course of the next decade.
One of the lawmakers at the hearing mentioned that $570 billion owed last year alone was not paid.
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The IRS has been combating both a decline in staffing and a decline in resources. In the collection group, specifically, there was a 19% decline in workers between fiscal 2013 and fiscal 2018. It has lost half of its revenue offices, the agency said, and about one-third of its overall workforce over the past decade.
Funding as of fiscal 2018 was $11.4 billion, down from $12.15 billion in 2010.
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In order to raise revenue to fund upcoming initiatives, including an infrastructure and clean energy push, as well as a people-focused domestic program effort, Biden has proposed raising rates on individuals and families earning more than $400,000 from 37% to 39.6%.
He has also proposed increasing the corporate tax rate to 28% from 21%. Those rates were lowered in 2017 with former President Trump's Tax Cuts and Jobs Act.
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Yellen said she believed it was appropriate to raise the corporate tax rate that Biden has proposed, but added that the government needs to be concerned about, and aware of, the competitiveness of U.S. firms.
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