The Biden administration on Thursday defended its assessment that it could raise $700 billion in revenue by pumping money into the Internal Revenue Service to beef up its enforcement capabilities amid criticism that its projections were overly rosy.
The Treasury Department released a 22-page report laying out the administration’s new “tax compliance agenda,” which is a centerpiece of its plans to pay for a $1.8 trillion infrastructure and jobs proposal. The Biden administration wants to give the I.R.S. $80 billion over the next decade so that it can overhaul its outdated technology and ramp up audits of wealthy taxpayers and corporations.
The Biden administration’s estimates of the return on investment that it could generate from boosting the I.R.S. budget far surpassed projections by the nonpartisan Congressional Budget Office. And John Koskinen, a former I.R.S. commissioner under President Barack Obama and President Donald J. Trump, has suggested that it would be hard for the cash-strapped agency to efficiently spend that much money.
The Treasury Department said that it believes its projections are conservative. Much of the revenue from more rigid enforcement would become evident in the later part of the decade, the report said, but Treasury officials believe that with more enforcement staff and better technology the I.R.S. can chip away at the “tax gap.”
$1 trillion owed to the government is not being collected every year. The Treasury Department estimated on Thursday that in 2019 the tax gap was $584 billion and is on pace to total $7 trillion over the next 10 years.
The Treasury report said that much of the revenue it estimates would come through its “information reporting” rules for financial institutions. This would give the I.R.S. more visibility into corporate accounts to determine how much money they are actually taking in and what should be taxed. The department said it expects that such reporting would be helpful for audits and would serve as a deterrent against corporate tax evasion.
The new information reporting rules would also include an effort by the Biden administration to bring cryptocurrencies into the tax regime and to crack down on those using cryptocurrencies to avoid paying taxes. The report said that cryptocurrency exchange accounts and payment accounts that accept them would fall under the reporting rules. Businesses that receive cryptoassets with a fair market value of more than $10,000 would be subject to information reporting.