What is the difference between tax avoidance and tax evasion?


  1. What is the “tax gap”? According to the article, how are Democratic candidates proposing to close the tax gap?
  2. According to the article, how has the budget of the IRS changed over the past 10 years? How does the article suggest that these budget changes have impacted the IRS’s auditing and enforcement efforts? Why do low levels of tax enforcement potentially reduce horizontal equity in the tax system?
  3. According to the article, why do some people have reservations about increasing the budget for IRS tax enforcement efforts? What alternative approach do these people propose as “a more responsible way” to help close the tax gap? Do you think increasing the IRS’s funding for tax enforcement is a good idea? Why or why not?
  4. What is the difference between tax avoidance and tax evasion? Is the “tax gap” the result of evasion, avoidance, or both?
  5. Increasing the IRS’s funding would go some way toward helping to reduce tax evasion. From a social standpoint, why will it never be optimal to reduce the amount of tax evasion to zero?
  6. As the article suggests, several of the Democratic candidates are proposing to increase IRS funding in part because the candidates are introducing a so-called “wealth tax” that would affect very high income households. Given what we learned in class about tax evasion, why do you think it might make sense to redouble anti-evasion efforts with the introduction of a wealth tax?

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