- Rep. Ro Khanna, Silicon Valley’s lawmaker in Congress, on Thursday proposed a bill aimed at bulking up auditing tools at the IRS.
- The legislation, if passed, would infuse the IRS with $70 billion to help the it hire staff to audit individuals making more than $1 million in total income.
- In announcing the legislation, Khanna’s office referenced wild trading in a handful of stocks over the last month, including GameStop.
- CEOs from trading platform Robinhood, social media site Reddit, market maker Citadel and hedge fund Melvin Capital will testify before Congress later Thursday.
Rep. Ro Khanna, Silicon Valley’s lawmaker in Congress, on Thursday proposed a bill aimed at bulking up the Internal Revenue Service’s enforcement tools and ability to crack down on tax evasion.
The legislation, if passed, would infuse the IRS with $70 billion between fiscal 2022 and 2031 to help the agency hire additional staff to audit individuals making more than $1 million in total income. Corporations with more than $20 billion in assets would also be prioritized for audits under the plan.
An additional $20 billion is tied to expanded taxpayer services and $10 billion is earmarked for upgrading the tax collector’s out-of-date technology in an effort to make it more efficient at catching fraud.
In announcing the legislation, Khanna’s office referenced the dramatic price volatility in a handful of stocks over the last month, including that of video game retailer GameStop.
“We know our tax system is broken, and it’s long past time we start fixing it,” the California Democrat and deputy whip of the Congressional Progressive Caucus said in a press release.
“Right now, the wealthiest one percent are responsible for roughly 70 percent of the ‘tax gap’—the difference between taxes owed and taxes paid. It’s time every American pay their fair share,” he added.
In an effort to support IRS efforts to learn more about the nation’s top earners, the bill would further require those who make more than $400,000 per year and receive income from “sources not previously disclosed” to announce their income on a new 1099 report.
Khanna’s bill, which his office estimates would generate $1.2 trillion in revenue, leans heavily on a study published by University of Pennsylvania professor Natasha Sarin, former Treasury Secretary Larry Summers and former IRS Commissioner Charles Rossotti.
In a 2020 report entitled “Shrinking the Tax Gap,” the trio write that the federal government misses out on hundreds of billions of dollars’ worth of revenue each year as a result of taxes that were legally owed but unpaid. The bulk of that tax gap is attributable to individuals underreporting their income on tax returns.
Unpaid taxes, they claim, total more than all the individual income taxes paid by the lowest 90% of earners.
“The failure of a minority of taxpayers to pay what they owe imposes significant burdens on those who are fully compliant,” Sarin, Summers and Rossotti wrote.