In the realm where law and economics converge, Natasha Sarin, Associate Professor of Law at Yale Law School and luminary in empirical law and economics, has emerged as a formidable advocate for tax fairness.
With a distinguished background that includes serving as Deputy Assistant Secretary for Economic Policy at the United States Treasury Department, Sarin has made it her mission to narrow the chasm between taxes owed by the American public and those collected by the Internal Revenue Service (IRS).
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Sarin’s journey into public service took a pivotal turn when she joined the Biden Administration as a Deputy Assistant Secretary for Economic Policy. Stepping away from her role as an Assistant Professor of Law at the University of Pennsylvania Carey Law School, Natasha Sarin delved into the intricacies of financial regulation and tax policy, contributing significantly to the discourse on closing the tax gap.
Why Tax Compliance Matters: A Deeper Dive by Natasha Sarin
In a recent event, Natasha Sarin shed light on the staggering $550 billion tax gap in 2019, surpassing the gross annual revenue of corporate giants like Amazon and Walmart.
This gap, she emphasized, is more than a fiscal challenge; it’s a societal issue that demands attention. The tax gap is projected to eclipse the federal government’s spending on Medicaid and Affordable Care Act subsidies over the next decade, underscoring its impact on critical public services.
Natasha Sarin articulated the administration’s focus on improving tax compliance as a means to enhance revenue, equity, and fairness in the tax system. She debunked misconceptions surrounding the proposed information reporting regime, clarifying that it aims to signal compliance among taxpayers with opaque income streams.
Senate Finance Committee Chairman Ron Wyden’s proposal, she explained, further refines the focus on wealthy tax evaders, aligning with the administration’s commitment to targeted enforcement.
The Financial Reporting Proposal: A Beacon of Clarity
As of October 14, 2021, in her role as Deputy Assistant Secretary for Economic Policy, Sarin penned an article elucidating the significance of financial reporting in the tax compliance agenda. The proposal, often clouded by misinformation, seeks to expand the IRS’s information toolkit without compromising individual transaction details.
Contrary to misconceptions, Natasha Sarin emphasized that the proposal does not mandate the reporting of all individual transactions. Instead, it directs banks to furnish aggregate information on account inflows and outflows, providing the IRS with a broader understanding of taxpayers’ financial activities. This, she argued, is pivotal in addressing the current information shortfall that tax evaders exploit.
Empowering the IRS: A Strategic Investment
The proposed $80 billion increase in IRS funding over the next decade emerged as a key point of discussion. Sarin highlighted the IRS’s 20% budget decline in real terms over the last decade, coupled with outdated technology and a depleted workforce.
The funding boost, she contended, is not just a monetary injection; it’s a strategic investment in modernizing the IRS’s technological infrastructure, ensuring data security, and improving taxpayer services.
To allay concerns about data security, Natasha Sarin underscored that the proposed funding would fortify the IRS against potential threats and enhance its capability to protect taxpayer data. Investments in taxpayer services, she added, could alleviate current frustrations, potentially boosting taxpayer compliance and enhancing the IRS’s public image.
A Fairer Tax System: Natasha Sarin’s Enduring Legacy
Natasha Sarin asserted that the administration’s proposals are not fleeting policy measures but durable foundations for rebuilding and modernizing the IRS. Insulated from political whims, these reforms, she argued, are essential for fostering tax fairness, increasing revenue, and creating a just society.
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