America’s income tax debate often focuses on rates and deductions, tax cuts and tax increases. Far less attention is paid to whether the federal government efficiently and effectively collects the taxes that current law already requires. The latest proposal to address that question is the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act, which would provide significant new funding for the Internal Revenue Service to strengthen enforcement and modernize outdated technology.
Over the past decade and a half, the IRS has seen significant changes in its resources and workforce. Between 2010 and 2020, the agency’s inflation adjusted budget declined substantially, enforcement staffing fell, and audit rates for large corporations and high-income taxpayers dropped sharply. During the same period, the tax code became increasingly complex, particularly for large partnerships, multinational corporations, and other sophisticated business structures that require specialized expertise to examine effectively.
The result is a sizeable “tax gap,” the difference between taxes legally owed and taxes actually paid. The Treasury Department estimates that unpaid taxes cost the federal government roughly $600 billion annually, with a significant share attributable to high income individuals and complex business entities. America has, in effect, drifted into a two-tier system, where most wage earners pay what they owe because their income is visible and pre-reported, while those whose businesses are more opaque can often underreport or use abusive tax shelters with little fear of being caught.
Every dollar that goes uncollected increases deficits, shifts a greater share of the tax burden onto compliant taxpayers, or requires Congress to borrow more to finance government operations. As a matter of pure fiscal policy, investing tax dollars in a tax collector with positive expected returns ought to be an easy sell for budget hawks. We’re talking about enforcing our laws, fairly. Seems like something we could all get behind, regardless of our politics.
Congress had sought to address these challenges in 2022 with approximately $80 billion in additional IRS funding over ten years. The agency reported improvements in customer service and began expanding enforcement efforts focused on high income non-filers and large corporations. Subsequent legislation, however, rescinded much of that funding even as the Congressional Budget Office repeatedly concluded that reducing IRS enforcement is a net revenue loser.
The Stop CHEATERS Act would help get IRS services back on track providing roughly $83 billion in mandatory funding between 2026 and 2031. Much of the funding would support enforcement directed at high income individuals and large businesses and replacing aging information technology systems. Independent estimates suggest the proposal could generate substantially more revenue than it costs, although projections vary. The common conclusion is that better enforcement generates positive fiscal returns.
Despite our country’s massive and unsustainable deficits, policymakers have chosen to tolerate a sizeable leakage of legally owed tax revenue, heavily concentrated among those best able to hire accountants and lawyers to game the system. The U.S. relies on a voluntary tax system, in which taxpayers are responsible for accurately calculating and paying what they owe. When some individuals and businesses are able to skirt those obligations, it undermines confidence in the fairness of the system and increases taxpayer cynicism. The Stop CHEATERS Act is a step toward a fairer, more responsive, and more modern tax system.
