I believe our national deficit can be reduced without raising taxes or cutting essential programs. Here's how: First, we need to collect the taxes that are owing under present tax law. The tax gap -- the amount owed in taxes versus the amount collected -- is currently about $300 billion a year, according to the Congressional Budget Office. Second, we must close the loopholes that benefit large multinational companies at the expense of American workers. These tax loopholes actually provide rewards for shutting down U.S. factories.
The amount of uncollected taxes skyrocketed beginning in the late 1990s -- a direct result of Congress slashing the IRS's enforcement budget. The enforcement division lost 36 percent of their staff between 1995 and 2003. Then, the IRS Restructuring and Reform Act of 1998 prohibited the IRS from conducting research on tax evasion. In other words, law enforcement was prohibited from keeping up with schemes to defraud our government. During this time the number of audits on poor Americans increased, and yet audits on those who make more than $100,000 per year dropped by 56 percent.
As for the loopholes, here's just one example: When U.S. multinational companies save money by closing an American plant and moving production overseas, they not only take away American workers' jobs, they get a tax benefit. They can defer paying taxes on profits until they repatriate those profits to the U.S., which they may never do. Companies remaining in the U.S. get no such favors.
If only 75 percent of the uncollected taxes and funds lost through loopholes had been recovered each year, they would have made up for the annual deficits until the onset of the 2008 financial crisis. The deficit this year will be much larger -- well over a trillion dollars -- largely the result of unfunded wars in Iraq and Afghanistan, the Bush tax cuts, and the recession, including the drop in tax receipts, the bank bailout expenses, increased unemployment payments, tax cuts in the stimulus bill, and other economic recovery spending.
Each annual deficit adds to the national debt. The national debt will represent 62 percent of the nation's economy by the end of this year, the highest percentage since just after World War II. That generation solved its problem by maintaining a top marginal tax rate of 91 percent until 1963, the period now viewed as the golden age of the growing American middle class. The current top rate is 35 percent. I do not advocate any income tax increases except on those making over $1 million per year, but at the very least we must collect the taxes that we are owed.