The Return of the Tax Gap Hype


Posted: Jul 15, 2021 12:01 AM

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Every policy wonk will tell you that after you live in Washington long enough, you start seeing the same issues reemerge on a regular basis. Common ones are praise for the magical ability of government spending to help pay for itself during recessions and handwringing over the myth of middle-class stagnation. And when Uncle Sam’s coffers are empty, everyone suddenly remembers the so-called tax gap — the difference between the tax revenues Congress expects versus those it actually collects.

So right on cue, calls to reduce the tax gap are back.

After the COVID-19 spending spree, the U.S. budget deficit is even higher than what we’ve become accustomed to. Meanwhile, President Joe Biden and his band of congressional superspenders are eager to extend many emergency programs, such as paid leave and child benefits, as well as spend a few trillion more on infrastructure and “stimulus.”

While politicians have no problem charging Uncle Sam’s credit card and leaving the bill for future generations, today’s leaders

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