GAO Finds Tax Fraud Could Cost US More Than $300 Billion a Year
The Government Accountability Office estimated in a report published Friday that the US might be losing over $300 billion annually in tax revenue due to fraud.
The forecasts of the federal oversight agency rely on information from 2018 to 2024 — prior to President Donald Trump's second term and the reductions made to Internal Revenue Service personnel by his administration. This time frame also encompassed the Covid-19 pandemic, a phase during which many notable frauds were uncovered aimed at the government.
Republicans have emphasized addressing “waste, fraud and abuse” as the core of their strategies to reduce the debt, which is around $40 trillion, but they have concentrated on cutting government expenditures instead of tackling tax evasion. In the meantime, the party has cut billions in funding for the Internal Revenue Service that Democrats designated during the Biden administration to enhance tax compliance.
The comprehensive tax law passed last year removed over $1 trillion from social programs, with many Republicans defending this by referencing the necessity to diminish “waste, fraud and abuse” in Medicaid and food aid.
The GAO's estimates on tax fraud, described as its initial attempt to assess these losses, suggest that fraud reduced revenue by $116 billion to $304 billion each year, roughly 2 percent to 6 percent of the taxes owed.
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IRS CEO Frank Bisignano challenged certain findings of the GAO in a letter within the report, stating that the oversight agency used an overly broad definition of fraud that might be attributed to other prevalent compliance issues.
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The GAO did not connect IRS funding to the agency’s capacity to identify and combat fraud; instead, it advised the tax collector to develop an anti-fraud strategy and form a unit within the agency to oversee efforts.
Representative Richard Neal, the leading Democrat on the House Ways and Means Committee, stated that Republican reductions to IRS personnel have compounded the issues.
“Democrats were correct to invest long overdue resources into increasing IRS staffing and enforcement against affluent tax evaders,” Neal stated.
“Trump’s intentional undermining of the IRS is exacerbating this issue, causing audits to drop and creating opportunities for increased fraud,” adds Neal.
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As his billionaire friends exploit the tax code, the American public is being cheated by a system designed to disadvantage them.