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Democrats in Congress set sights on unpaid taxes

Published: Sunday February 4, 2007
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According to an article in Monday's New York Times, Democrats in Congress are "hoping to finance an ambitious agenda without raising taxes" by collecting part of the $300 billion estimated to be lost every year due to unreported earnings.

However, a struggle is shaping up between the Democrats, who rely on IRS statements that it would be easy to collect an additional $50 to $200 billion a year, and the Bush administration, which believes that no more than $20 billion could realistically be gained by tightening up on tax cheats.



On Monday, as part of President Bush's budget proposal, the Treasury Department will unveil more than a dozen proposals to pursue tax cheats. But officials said those ideas would bring in less than $20 billion a year in extra revenue. Mark W. Everson, the IRS commissioner, has expressed far greater optimism. At a hearing of the Senate Budget Committee a year ago, he told lawmakers that the government could recover "between $50 billion and $200 billion without changing the dynamic between the IRS and the people."

The looming clash over how much can be collected and how to do it has important political implications. If estimates of the tax gap are accurate, Democrats could have a huge amount of money for new spending on energy, education and domestic security.

Democrats badly want the money, because they have adopted strict "pay as you go" budgeting rules that require Congress to pay for any new programs or tax cuts with revenue from other areas.

"The tax gap is the logical place to go," said Rep. Rahm Emanuel, D-Ill., and chairman of the House Democratic Caucus.