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I'M HOLDING YOUR LADDER HOSTAGE UNTIL YOU CLIMB UP

September 27, 2006

Max Baucus, the minority leader of the Senate Finance Committee, has been holding up the nomination of Eric Solomon as the head of the Treasury's Office of Tax Policy; he wants the Treasury to come up with a plan to close the $345 billion tax gap before he will let the nomination through.

That's an interesting concept, as tax policy leadership would seem to be an important part of any gap-closing effort. The Treasury took a shot at it yesterday, releasing "A Comprehensive Strategy for Reducing the Tax Gap"

My short version:

- More document matching
- More research audits to better target audit efforts.
- More document matching
- Simpler tax laws
- More document matching.

That's probably about right. Whether it's enough to get Mr. Solomon sprung from the Baucus holding cell is unclear.

With bureaucratic understatement the report makes one point the policy makers should heed:

Moreover, while it may be possible to develop a comprehensive strategy that reduces the tax gap, it is not possible to implement a policy that would come close to eliminating the tax gap without an unacceptable change in the fundamental nature of our tax compliance system.

You won't get 100% compliance, even in a dictatorship. You do, however, need to address the schmuck factor.

Link: Executive Summary.

A comprehensive approach to closing the tax gap.