Almost all of these losses come from the fact that many small businesses report just a fraction of their income to the IRS. In the Bush years there was at least some bipartisan consensus that giving the government the tools to close the tax gap was a good way to balance the budget without cutting programs or raising taxes. Now that's all changed. Per CBPP's Chuck Marr.
The Bush Administration pushed successfully for new withholding requirements on government contractors on the heels of troubling Government Accountability Office investigations showing widespread tax abuse. Then, in the 2010 health reform law, the Obama Administration teamed up with congressional Democrats to tighten reporting requirements on certain business transactions. These were two modest but real steps forward.
The current Congress, however, repealed both measures. To make matters worse, in last year's deficit-reduction legislation (the Budget Control Act), House Republicans blocked Senate Majority Leader Reid's effort to ensure sufficient funding for IRS tax compliance activities, even though the Congressional Budget Office concluded that it would have generated net budget savings of $30 billion over a decade.
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