Photo by Brett Jordan on Unsplash
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Every year, the Internal Revenue Service misses some legally due taxes. The agency also has let us know the amount of the annual revenue shortfall, popularly known as the Tax Gap. Until now.
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Most of us have learned to take Donald J. Trump’s payment promises with a gazillion grains of salt. So, we aren’t expecting to get $5,000 checks if Republicans win the midterm elections.
Some of his fellow GOP lawmakers also have spiked the idea. One reason, according to the party’s fiscal hawks, is that Uncle Sam already is facing problems paying his bills. The so-called Trump Dividend would add more than $1 trillion to the national debt and require Congress to raise the debt limit by more than initially expected to cover the reminder of his second term.
Trump administration actions haven’t helped here, and I’m not just talking tax cuts in the One Big Beautiful Bill Act of 2025. During his second term, Trump also has drastically cut the federal workforce tasked with collecting revenue to keep the country running.
And that personnel move could be why Trump’s understaffed Internal Revenue Service has decided not to issue its usual annual announcement of the Tax Gap. That figure is the tax legally owed under existing law, but which the IRS has not, for a variety of reasons, been able to collect each year.
“The Trump administration has held up the publication of an annual Internal Revenue Service estimate of unpaid taxes, a delay that could mask the fiscal cost of the steep decline in the agency’s ability to audit the rich,” writes New York Times reporter Andrew Duehren.
Tax Gap tally timing: The last Tax Gap announcement was in October 2024. That year, the IRS estimated that around $696 billion in owed tax was not collected in 2022. That was an increase of $200 billion over tax years 2014-2016.
The 2023 estimate, which would provide the Tax Gap for 2023, was scheduled to be published last fall. We’re still waiting.
IRS CEO Frank Bisignano, who heading the agency in the absence of the traditional Senate approved commissioner, doesn’t put much stock in the Tax Gap figures. Duehren reports that Bisigano wants to focus instead on what he called the “addressable tax gap,” and said in a recent email to IRS staff that Vincent LaPadula, who joined the agency this summer from JPMorgan Chase & Company, would lead work in this area.
Whatever you call it and however you collect them, the annual figures are one way to show how well, or not, the IRS is doing its core job of collecting tax money.
And while the missing Tax Gap report covers 2023 and therefore won’t provide any insight into changes in tax compliance resulting from the Trump administration’s IRS downsizing, the number still could show a pattern.
Plus, notes Duehren, “the absence of the data could make it more difficult to assess whether more taxes were going uncollected after Mr. Trump took office.”
Some cynics, and yes, that includes me, would say the possibility of falling tax collections under Trump is the real reason why the IRS is sitting on the report.
It’s also why Duehren’s look at the Tax Gap — “Billions in Taxes Go Unpaid. Under Trump, the I.R.S. Won’t Say How Much.” — gets this weekend’s Saturday Shout Out.
Missing Tax Gap tidbits: I’ll let you read it at your leisure, but here are few of Duehren’s points that caught my eye.
- In addition to illustrating the extent and sources of tax noncompliance, the Tax Gap has also been cited to argue for giving more resources to the IRS. Charles P. Rettig, IRS commissioner in Trump’s first term, speculated in 2021 that the Tax Gap could be as much as $1 trillion a year, a figure much larger than the I.R.S. estimate at the time, as he called for a bigger budget for the agency.
- The IRS has consistently found that income independently reported, like wages, is rarely underreported, while income without third-party verification, like business profits, often goes unreported. Overall, 85 percent of owed taxes were paid voluntarily and on time in 2022, the IRS said.
- When Republicans eventually clawed back most of the $80 billion the Biden administration’s Inflation Reduction Act of 2022 fund for the IRS to modernize operations, GOP members in Congress also began to question the reliability of the annual Tax Gap estimates. “Republicans didn’t like that it really points the finger at the wealthy as being the problem,” Barry Johnson, who previously oversaw the tax gap report as the chief data and analytics officer at the IRS, told Duehren.
A few more random revenue thoughts: Finally, let me close with a few more takes on tax revenue and efforts to collect it (in shameless self shout outs this Saturday) in case you missed them.
As noted in my Aug. 31 post, the IRS received a record tax take of $5.3 trillion in fiscal 2025 even though enforcement efforts fell.
But it could have been more, argue IRS critics, if the agency better policed itself. A Treasury Inspector General for Tax Administration (TIGTA) report in May found that federal workers and retirees owed $6.3 billion in delinquent fiscal year 2021-2024 taxes.
We can’t, however, overlook the wealthy when we talk taxes, both owed and paid. The rich tend to pay at a lower tax rate than the rest of us. That’s because most of us not-wealthy depend on wage income, whose tax code treatment means salaries are for suckers, or why the U.S. tax system should make you furious.
Finally, as Trump also steps into the artificial intelligence debate, let’s keep in mind that there’s always the hope/fear that AI will help/hurt when it comes to tax collection.
