The deadline for Americans to file their taxes just passed—but every year, the federal agency tasked with processing returns fails to collect billions of dollars in taxes owed.
The amount the federal government doesn’t collect could cover the cost of a number of key priorities in K-12 education, according to an Education Week analysis.
This phenomenon, known as the “tax gap,” costs the federal government an immense sum each year. Charles Rettig, commissioner of the Internal Revenue Service since 2018, told Congress he believes Americans collectively owe $1 trillion or more each year in unpaid taxes.
A more conservative estimate in 2021 from the U.S. Treasury Department suggests the annual sum is around $600 billion.
Much of that amount, researchers and officials say, stems from complex transactions around emerging industries like cryptocurrency, and from sophisticated tax evasion by the wealthiest Americans.
“If you’re a teacher, if you’re a fireman, if you’re a police officer, you get a W-2, so the IRS knows how much money you earn,” Wally Adeyemo, deputy secretary of the U.S. Treasury Department, told NPR last year. “But if you’re a billionaire or a millionaire, you’re far more likely to be able to avoid taxes.”
If the federal government successfully collected all of the taxes Americans owe, major education initiatives that have been overlooked or underfunded could become within reach.
The federal government currently plays a small but significant role in K-12 education spending, contributing roughly 8 to 10 cents for every dollar America spends on public schools.
Here are 10 examples of additional expenses the federal government might consider if it were collecting all the tax dollars owed to it. These examples range from expansions of existing federal programs to investments in sizable education expenses that states and districts routinely struggle to cover.
Congress appropriated slightly less than $200 billion in three rounds of relief aid for schools during the first year of the pandemic. Those funds helped pay for countless HVAC upgrades, COVID mitigation tools, academic intervention programs, and digital technology tools.
Schools are pondering a future without that additional and unprecedented source of revenue. But $600 billion in additional taxes owed could pay for three more comparable rounds of relief aid for schools—ESSER IV, V, VI, and so on.
Advocates for the nation’s growing population of students with disabilities have long protested the federal government’s failure to meet its 1976 commitment to pay for 40 percent of the excess costs of special education services. President Joe Biden said on the campaign trail that he wants to see the program fully funded, but his administration thus far has fallen far short of that goal.
IDEA currently covers roughly 13 percent of excess special education costs, according to an analysis by the Committee for Education Funding. To reach 40 percent, the federal government would need to roughly triple the amount it spends, from its current level of roughly $15 billion to approximately $45 billion.
The federal government boosted its $19 billion program for free breakfast and lunch for low-income students to close to $30 billion in 2020 to make the program available to all students who wanted to take part. Since then, the federal government backed off the universal offering, but some states have picked up the tab. Restoring the pandemic-era universal meal offering would cost about $10 billion.
Nationwide, K-12 schools need to spend $85 billion more than they currently do to ensure that all of their buildings are safe, modern, and up to date, according to estimates from experts who have studied or worked directly on school facilities for states and districts.
A group of Democratic House lawmakers since 2021 have been pushing a bill that would fuel a major investment in modernizing America’s school buildings and preparing them for a future irrevocably altered by climate change. The Green New Deal for Public Schools carries a $1 trillion price tag over 10 years. Another bill from Democrats that’s been floating around since before the pandemic would invest $130 billion in federal grants for schools to upgrade facilities and resolve longstanding maintenance issues.
Neither bill has gained traction.
Politicians across the political spectrum have long insisted that teachers should earn more than they do. The current national average teacher salary is $65,609—virtually the same as it was in the late 1960s, when adjusting for inflation.
A 2019 U.S. Senate bill proposed by current Vice President Kamala Harris would have invested $315 billion to increase that average by $13,500. The Center for American Progress, a liberal think tank, proposed a $10,000 federal tax credit for teachers in high-poverty schools. All told, that tax credit would have annually cost the federal government close to $15 billion.
The Title I grant program has long been criticized by researchers who argue it fails to target aid to many of the students and schools that most need it. But it remains a frequent talking point among politicians aiming to increase school funding. Funding for Title I could be tripled from current levels as President Biden has pledged to do, and not even put much of a dent in the annual share of unpaid taxes.
The federal government this year devoted $18 billion to Title I. Tripling that would require an additional $36 billion.
The federal government supplies additional resources to schools for students learning English through the Title III grant program. Right now the annual sum of those funds is roughly $740 million. In 2020, Century Foundation, a progressive think tank, estimated Title III funding should increase to $1.2 billion to account for recent growth in the number of students who require those services.
During the early days of the pandemic, Congress allocated $800 million in emergency funding for homeless students through the existing federal McKinney-Vento grant program. A bipartisan coalition of Congress members and nonprofits that focus on youth services have urged Congress to maintain that level of funding each year, but last year the program had only $129 million.
Researchers calculated that America would collectively need to spend between $325 billion and $930 billion to fully address learning gaps that arose from long-term remote learning during the COVID-19 school shutdowns of 2020 and 2021.
States and districts are on the hook for billions of dollars of debt they’re incurring on obligations they haven’t yet funded for pensions for teachers and other school workers. The total sum of those unfunded liabilities is roughly equivalent to the nation’s annual spending on K-12 schools as a whole, including state and local dollars.
