ICYMI: Former Treasury Secretary Lawrence Summers Pens Op-Ed, Calls CBO Revenue Projections "Conservative"

"… I am confident that the proposed investments can generate much more revenue than the CBO assumes."

President Biden's Build Back Better Act, which is currently being debated in Congress, proposes historic, transformative investments in America's families and the middle class. The bill is fully paid for by asking the wealthiest Americans and corporations to pay their fair share in taxes and giving the Internal Revenue Service (IRS) the resources to enforce the law.

Today in the Washington Post, former Treasury Secretary Lawrence Summers explains why he believes the current Treasury and CBO revenue projections underestimate the impact of IRS enforcement provisions. He argues that the Treasury projection is conservative and the enforcement measures will shrink the tax gap.

See excerpts from the Op-Ed below:

Washington Post: Op-Ed: IRS reform will generate a lot more revenue than the CBO thinks
[By Lawrence Summers, 11/17/21]

"… Today, the IRS has about the same number of auditors as it did during World War II, and the IRS can answer fewer than 30 percent of the phone calls it receives from taxpayers with questions. IRS technology is woefully outdated, and it fails to allow for even simple data analytics to identify evaders. Providing the IRS the resources it needs will go a long way towards shrinking the tax gap."

[…]

In general, I believe policy should be set on the basis of official scorekeeping by nonpartisan scorekeepers. But, in this case, it would be irresponsible to not recognize that the CBO estimate for tax-compliance efforts is conservative to the point of implausibility. Assuming the administration is successfully able to develop and implement sound plans for the IRS — which will require substantial management and strategic planning to go with the new resources — I am confident that the proposed investments can generate much more revenue than the CBO assumes.

[…]

"But what this approach fails to recognize is that the president's budget proposal reinvigorates an IRS that has been gutted during the past decade, with audit rates for millionaires falling by more than 60 percent and halved for large corporations. That audit revenue has declined exactly 1:1 in proportion to reduced audit efforts suggests that audit revenue will increase proportionally when cuts are reversed. Further, the administration proposal calls strongly for focusing new enforcement resources on the high end, where underpayments are greatest. Further, the CBO should recognize systemic changes are more impactful than incremental ones."

[…]

"Cumulatively, these three adjustments would be sufficient to raise the CBO estimate above Treasury's $400 billion measure. My judgment is that even Treasury is far too conservative. This estimate is less than half of what I concluded, in work with Natasha Sarin (who is now at the Treasury Department), can be generated by an infusion of resources into the IRS of about the same size as proposed by the Build Back Better Act. And while my estimates are much higher than those of Treasury, they are just less than half what other experts, including former IRS commissioners Fred Goldberg and Charles Rossotti, conclude can be generated by a robust attack on the tax gap."

[…]

"… There is a reason that a bipartisan group of former Treasury secretaries and IRS commissioners (including the current commissioner, appointed by the prior administration) have coalesced around overhauling the IRS. Nothing is more important for tax reform efforts."