Letter: To Henry M. Paulson, Jr, Secretary, Department of Treasury

Letter

Mr. Secretary,

We are writing to bring to your attention a letter (attached) that Representative Rahm Emanuel received from Jay Soled, Professor of Taxation, Rutgers University. In that letter, Professor Soled raises concerns about the assumptions that were used by the Treasury Department in estimating the revenue generation that would result from the implementation of the Administration's proposal to require third-party basis reporting for securities transactions. As you know, this proposal is aimed at addressing the capital gains tax gap, which the I.R.S. estimated to be $11 billion in 2001. We ask that the Treasury Department revisit the study that is cited in Professor Soled's letter and explain the discrepancy raised in his letter, namely that the Treasury Department's proposal to require third-party basis reporting for securities transactions only increases revenues by $7 billion over ten years despite the fact that based on the study mentioned in the attached letter, Professor Soled believes the annual revenue loss associated with misreporting attributable to "stocks and bonds" and "gain distributions" is between $5.6 billion and $7.5 billion, depending on what the applicable capital gains tax rate is at that time. We ask that the Treasury Department provide a detailed analysis of the assumptions used in determining the amount of revenue raised from this proposal, and whether the conclusions of the Thompson study were used in calculating the overall revenue increase that would result from this proposal.

We thank you for your attention to this matter and look forward to working with on a bipartisan basis to close the capital gains tax gap.

Source