America doesn’t need a tax hike to balance the books

In Washington, blunt instruments get the most airtime. Tariffs. Surtaxes on millionaires. Wealth taxes with names that sound like protest signs. They’re simple, symbolic, and politically useful.

There’s a quieter option. Less tweetable, more consequential. It's called closing the tax gap. If done properly, it could return hundreds of billions to the U.S. Treasury without touching marginal rates or picking new fights with trading partners. Paired with will-designed reductions in spending to pay down government debt, we have a sensible path to recovery.

Where the money slips away

The IRS estimates that the U.S. misses out on $600 billion a year in legally owed taxes. That’s the gross tax gap, and it’s roughly equivalent to Sweden’s GDP or, if you prefer context closer to home, 2.3% of U.S. GDP. Most of it doesn’t come from offshore accounts or Swiss banks—it’s coming from under-reported income right here in the domestic economy.

Breakdown of the gap:

While multinational tax gymnastics get the headlines, the real leakage is happening among high-income individuals and pass-through entities. A 2021 Treasury-supported study found that the top 1% accounts for $160 billion in lost tax revenue annually. This isn’t tax fraud in the dramatic sense—it’s aggressive compliance in a system designed not to catch it.

We don’t need new laws, just better use of the old ones

The appeal here is that fixing this doesn’t require rewriting the tax code. It just requires enforcing it.

According to Treasury and CBO analysis:

• $80 billion invested in IRS modernization could return $200 billion in revenue over a decade.
• Targeting specific schemes like basis shifting adds another $50 billion.
• All up, that’s about $25 to $30 billion a year in recovered revenue—without raising rates.

The math is sound. The policy case is solid. So why hasn’t this happened?

Politics, predictably

Funding the IRS polls about as well as a root canal. It’s also a tough sell because enforcement tends to target high-income filers with complex returns—the exact cohort that can lobby for looser rules. Add to that the fact that global tax avoidance is a multiplayer game, and unilateral reforms often feel like trying to catch smoke with a butterfly net.

Still, there are pragmatic options on the table:

Strategic tax enforcement priorities

• Restore IRS capacity, especially for high-income audits.
• Fix GILTI and refine global tax treatment of intangible income.
• Mandate transparency: country-by-country reporting and beneficial ownership disclosure.
• Increase penalties for structured avoidance, not just evasion.
• Support global coordination, including the OECD’s minimum tax framework.

None of this is radical. It’s just not designed for applause lines.

Just do it, anyway

Yes, this will be difficult. The resistance will be well-funded, well-briefed, and fluent in the language of economic anxiety. But most of that resistance isn’t about growth—it’s about power.

The argument that tax enforcement hurts the economy is often a polite way of saying: don’t ask too many questions about how we make our money.

But good policy doesn’t need to be easy. It needs to be right.

JFK’s moonshot speech is overused, but the line holds: “We choose to go...not because it is easy, but because it is hard.” Closing the tax gap isn’t space travel. It’s spreadsheets and subpoenas. But the logic is the same—hard things are often the most worthwhile.

Sources & references

• The Case for a Robust Attack on the Tax Gap (U.S. Dept. of the Treasury)
• Tax Gap Estimates for Tax Years 2014–2016 (IRS)
• CBO Estimates $120 Billion from IRS Funding Boost (CRFB)
• Starbucks’ Tax Avoidance via Switzerland (Business Insider)
• IRS Layoffs Could Hurt Revenue Collection (AP News)