April 14,2005

Grassley Works to Close $350 Billion Gap Between Taxes Owed and Paid

Opening Statement of Charles E. Grassley, Chairman
“The $350 Billion Question: How to Solve the Tax Gap”
April 14, 2005

Today is April 14th, the day before tax day – April 15th. The eve before tax day is differentthan Christmas Eve – because taxpayers have no choice on whether it is better to give or receive –we’re all giving. The eve before tax day is also different than New Year’s Eve because taxpayersare spending it with pencils and calculators instead of champagne and noisemakers, although Isuspect some people will be making a lot of noise in frustration as they try to figure out their taxreturn and try to navigate the earned income credit or the alternative minimum tax. Unfortunately,while the strong majority of Americans seek to honestly pay the amount of tax they owe and not apenny more, there are many who are playing fast and loose. The problem of the tax gap is costingthe nation over $300 billion a year in taxes that are not voluntarily paid. I say to my colleagues thatthere are no easy solutions or answers here. I’m worried that too often senators feel that just a waveof the hand can solve this problem and put billions into the nation’s coffers. If it were that easy, wewould have done it long ago.

We are fortunate to have the Comptroller General of the United States, Mr. Walker, heretoday whose statement says it very effectively that ending the tax gap will be “a challenging task”and that there is no single solution. It will take multiple efforts on different fronts to address thisissue. As I said in last week’s hearing involving charities and charitable giving, the tax gap – likea loaf of bread – is made up of many different slices. We need to understand each one better andlook at several ways to address them. But let me make it clear, we will work to address the tax gap– we owe nothing less to the millions of honest working families who find tax day the toughest dayof the year. It is absolutely wrong that families have to tighten their belts and find new ways to keepthe family budget balanced because others are not paying their fair share.

Today our witnesses will talk about under-reporting, underpayment, and non-filing of taxes,but we will also hear about cases of outright fraud. This is not a matter of taking advantage ofcomplexities in the code or exploiting grey areas, but open intentional evasion of fuel excise taxesor totally false claims for refunds of fuel taxes never paid, on fuel that they never purchased. Thistype of fraud probably effects every American, because this is the dedicated tax money that buildsAmerica’s highways in every state of the nation. Every dollar these bad guys steal is a dollar thatdoes not make your bridges safe or fix the potholes in your highways.

Last fall, as a part of the American Jobs Creation Act, we were able to enact an anti-fuelfraud package estimated to raise $9.3 billion by shutting down many of the schemes involving fueltax fraud. But criminals are creative and we continue to investigate schemes that range from largescale rings to mom-and-pop operations. Unfortunately, the higher the price of gasoline the more theyare motivated, by blending everything from used motor oil to discarded paint thinner and cleaningproducts by the billions of gallons to otherwise hide the true nature of the gasoline you may or maynot get at the pump. Unfortunately, they not only steal from the U.S. government -- they steal fromyou, too. The tax gap is a $350 billion dollar problem, and we are all working hard to find solutionsfor the American taxpayer.