Collecting What We’re Owed: The $700 Billion Solution
How Basic Competence Could Fund America’s Future
Last month I filed an expense report with the wrong Uber receipt attached. The AI caught it in milliseconds.
I’m accountable to management and shareholders to be a good steward of company funds.
Now imagine if my company didn’t check receipts. Didn’t verify invoices. Let employees expense without oversight. We’d be bankrupt in a year.
My company holds me accountable for every dollar I spend. The federal government can’t even collect the taxes it’s legally owed.
THE $700 BILLION PROBLEM
In 2023, the IRS collected $4.9 trillion in revenue. We left $700 billion on the table—a 14% loss rate.
According to the Yale Budget Lab, the annual tax gap is approximately $700 billion. Stanford’s Rebecca Lester has documented how complex partnership structures contribute disproportionately to this gap.
Let’s put that in perspective. The annual budgets for the departments of Education, Transportation, Interior, and NASA are:
Education: $195 billion
Transportation: $294 billion
Interior: $99 billion
NASA: $45 billion
We could fund Education, Transportation, Interior, NASA, the National Endowment for the Arts, and the Corporation for Public Broadcasting without raising taxes or borrowing another nickel, if we simply collected what we’re owed.
No restaurant would survive collecting only 86% of what customers owe. Yet that’s exactly how we run the IRS.
THE SABOTAGE
Between FY 2010 and FY 2022, the IRS budget declined 18% while shedding more than 33,000 employees from the workforce. Some of the agency’s computer systems still run on COBOL—a programming language from 1959. It can’t communicate between divisions. It processes paper returns by hand. It takes 2+ years to resolve identity theft cases.
Yet we continue to defund the IRS. The Yale Budget Lab estimates that continued IRS cuts combined with lack of technology investment could cost the Treasury more than $2.4 trillion over the next decade as the tax gap grows and compliance deteriorates further.
This isn’t incompetence. It’s strategy. You can’t campaign on “I’m helping donors avoid taxes,” but you can campaign on “I’m cutting wasteful government spending” while achieving the same result.
WHO’S NOT PAYING
The loss isn’t evenly distributed. Every dollar cut from IRS enforcement saves high-income taxpayers an estimated $7 in unpaid taxes. Here’s where the $700 billion goes:
High-net-worth individuals using offshore accounts and complex trusts
Small business cash transactions
Corporate tax avoidance through transfer pricing and profit shifting
The informal economy including gig work and cryptocurrency
The people with armed with accountants and lawyers—those who can afford to create shell companies within shell companies, ownership chains fifteen layers deep designed to obscure who actually owns what—pay the smallest share of what they owe. W-2 employees whose income is automatically reported pay nearly 100% because they have no choice.
THE DENMARK COMPARISON
There’s a better way. Denmark collects 97% of taxes owed. How?
Pre-filled tax returns: The government calculates what you owe. You click “approve” on your phone. Takes 3 minutes for Danes vs. 13 hours for Americans.
Real-time income reporting: Employers report income continuously, not annually.
Integrated digital systems: Tax, employment, healthcare, and social services communicate through one system.
Modern enforcement tools: Denmark invests in collection because every dollar spent returns multiple dollars.
We don’t need Denmark’s high marginal tax rates. We need their competence.
THE HUMAN COST
That $700 billion in unpaid taxes isn’t an abstract accounting problem. It’s every unfilled teaching position, every closed rural hospital, every crumbling bridge, every person who dies from an opioid overdose because treatment programs were cut. When $700 billion in taxes goes uncollected, the people who can least afford it pay the price.
THE SOLUTION
Modernize the IRS with a one-time $15 billion technology investment and restore enforcement funding to 2010 levels ($5 billion annually).
Technology Modernization ($15B one-time):
Replace COBOL systems with modern, integrated platforms
Implement AI-powered fraud detection
Create pre-filled return systems like Denmark’s
Enable real-time income verification
Build cross-agency data sharing
How we pay for this technology matters just as much as the technology itself. The federal government’s systematic failure in technology contracting must end.
Two examples of this failure:
Cerner/VA electronic health records: $10 billion spent on a system so dysfunctional it endangered patient safety
Healthcare.gov rollout: Initially budgeted at $93 million, ultimately cost over $2 billion and failed at launch
In each case, contractors were paid cost-plus or time-and-materials regardless of performance. In each case, failure was rewarded with more funding to “fix” the problems. In each case, there was zero financial penalty for non-performance. This isn’t bad luck. It’s bad incentives.
We need to flip the model. Structure contracts so that 30-40% of total compensation is tied directly to the ROI the system delivers. This is how private equity structures deals—skin in the game, payment for performance.
Enforcement Restoration ($5B annual):
Hire auditors and tax attorneys focused on high-net-worth individuals, intricate partnerships, and complex corporate returns
Increase audit rates for households earning over $400,000 (currently <1%)
Expand criminal investigation capacity
Improve taxpayer services to reduce unintentional non-compliance
THE RETURNS
Technology investment: 2x return ($30 billion over 5 years)
Enforcement investment: 7x return ($35 billion annually)
Total estimated additional revenue: $200-250 billion over 5 years
These are conservative estimates based on initial modernization investments. The ultimate goal is to make a more significant dent in the $700 billion annual tax gap through sustained enforcement and technological improvements.
The recovered revenue goes toward deficit reduction and funding existing obligations—without raising a single tax rate or creating new taxes. This is about collecting what’s already owed under current law.
THE ACCOUNTABILITY
Public annual reports measuring revenue collected, cost per dollar collected, audit rates by income category, voluntary compliance rates, and processing times. Programs that don’t deliver results get adjusted or terminated. This is a transparent program focused on improving tax compliance not an opaque set of objectives with vague metrics.
WHAT’S DIFFERENT
Transparent targeting of high-income taxpayers with mandatory public ROI reporting—not the opaque $80B allocation that Republicans killed in 2022.
THE BIPARTISAN CASE
This proposal works for both parties:
For Republicans: This is actual fiscal conservatism—collecting what’s already owed under current law, not raising rates.
For Democrats: This funds investments in working families without raising middle-class taxes. It’s progressive enforcement focused on high-income taxpayers, not W-2 workers.
For Americans Worried About IRS Overreach: The enforcement focus is surgical: high-net-worth individuals, intricate partnerships, and complex corporate structures where the gap is concentrated. Regular taxpayers whose income is already reported automatically won’t see any change. This includes mandatory transparency—you’ll see exactly where every enforcement dollar goes and what it returns.
CONCLUSION
The only question is whether we have the will to implement it.
We know how to do this. We’ve done it before. In 1941, Senator Harry Truman created an oversight committee with a $15,000 budget that saved $10-15 billion in military spending ($180-270 billion in today’s dollars). The committee was bipartisan, fact-based, and relentlessly focused on results. It made Truman a national figure and propelled him to the White House.
That’s what government accountability looks like: bipartisan oversight, measurable results, and consequences for failure. We’ve lost that standard.
The IRS modernization proposed here would restore it. Recovering $200-250 billion over five years—$40-50 billion annually—by collecting taxes already owed under current law. No new taxes. No rate increases. No expansion of what Americans owe. Just competent government held accountable for delivering results.