Bayh, Durbin, Obama, Kerry, Carper and Emanuel Urge IRS to Close Capital Gains Tax Gap

Bayh, Durbin, Obama, Kerry, Carper and Emanuel Urge IRS to Close Capital Gains Tax Gap

Bi-cameral letter says START Act will stop tax cheats, give taxpayers better information & reduce deficit

Washington, D.C. -- U.S. Senator Evan Bayh today called on the Chairman of the Internal Revenue Service (IRS), Mark Everson, to support his legislation that will help crack down on tax cheaters and close a $17 billion capital gains "tax gap," or money legally owed to the government that is not collected. In a letter with Senators Durbin (D-IL), Obama (D-IL), Carper (D-DE) and Kerry (D-MA) and Congressman Rahm Emanuel (D-IL), Bayh said his legislation, the Simplification Through Additional Reporting Tax (START) Act of 2006, would help reduce the deficit by making the tax code fairer and simpler for American taxpayers.

In their letter, Senators Bayh, Durbin, Kerry, and Obama, and Congressman Emanuel, outlined how the START Act (S. 2414) would help close the capital gains tax gap by providing much-needed information to taxpayers struggling to determine their correct tax level and to the IRS trying to stop would-be cheaters from lying about their true capital gains profits. They cited the IRS Commission's own recent statements in making the case for greater information reporting.

"Recently, you said that 'Helping taxpayers better understand their obligations under the current tax law will facilitate compliance'," the Members wrote. "The START Act accomplishes that goal. Providing adjusted cost basis information to taxpayers will help them file accurate tax returns without having to do confusing and time-consuming calculations."

The START Act, which was introduced in March, would require brokerage houses and mutual fund companies to track and report to taxpayers and the IRS the "adjusted cost basis," or purchase price plus any necessary adjustments, when they sell a stock, bond, or mutual fund. This will make the tax code fairer by ensuring that the IRS receives an independent verification of individuals' investment value, as currently occurs with wages, closing the door on taxpayers who are not paying their fair share in taxes. It will also help individuals file accurate tax returns without the headache and confusion of additional calculations.

Currently, about $17 billion in capital gains taxes go unpaid every year in part because of intentional manipulation of investment values to hide gains and manufacture losses. Since the IRS has virtually no ability to detect this misreporting, it can be done with impunity, leaving honest taxpayers to pick up the tab. At a time when our nation is facing urgent fiscal challenges, Bayh's legislation would help collect legally owed capital gains taxes, which could represent as much as $170 billion over the next ten years.

The START Act currently has seven Senate co-sponsors. Congressman Emanuel has introduced this proposal as part of his comprehensive tax reform legislation (H.R. 5176) and introduced the House version of S. 2414 today.

http://bayh.senate.gov/~bayh/releases/2006/05/11may06pr.htm