The Conclusion emphasizes the book’s primary argument, that its proposed system of means-based adjustments to the tax compliance rules would more effectively deter tax avoidance and evasion by the rich than would reforms focused solely on increasing the IRS’s funding or on rules targeting specific potentially abusive activities. It notes that the book has provided four practical applications of this approach – as adjustments to tax penalties, penalty defenses, the statute of limitations, and information reporting – but that these examples are just the beginning. The book concludes that its analysis and new approach to tax administration should be relevant to legislators and other tax policymakers, scholars of both tax law and progressivity, and federal and state tax administrators.

How much tax revenue is lost each year as a result of noncompliance? How much of this lost revenue is from the richest taxpayers? How do the rich avoid paying taxes and why does it matter? This chapter considers these basic and important questions. The answers explain our motivation for writing this book and provide a starting point for the arguments that follow. This discussion also begins to explain why this book focuses on high-end tax noncompliance as a distinct challenge for the tax system. To answer these questions, we begin by describing exactly what we mean by tax noncompliance. The discussion then presents research findings on the scope of tax noncompliance and how it is shared across the income distribution. It then explains how high-end taxpayers can often avoid paying the taxes they owe by taking advantage of strategies that are not available to low- and middle-income taxpayers. Finally, we discuss why high-end noncompliance is harmful to the tax system, and why policymakers should treat it as a pressing challenge.

This chapter turns to the structure of the tax compliance system and how it attempts to address high-end noncompliance. It begins by situating the tax compliance rules within the broader tax system. The discussion considers what they share with all tax rules and what sets them apart. The following sections begin a more detailed dive into the structure of the tax compliance system. After addressing what motivates taxpayers to comply with the tax law, the discussion considers the main components of the tax compliance system, and how these components leverage taxpayer motivations to improve compliance. With this important context on the tax compliance system established, the discussion then returns to the challenges of high-end noncompliance. The final part of this chapter describes the two most prominent approaches in current law and reform proposals. The first general approach is to increase funding of the Internal Revenue Service so it can more effectively deter noncompliance and recover unpaid taxes. The second general approach is what this book terms “activity-based” rules, targeting the specific taxpayer activities that can either indicate or enable tax noncompliance.