Yellen's latest hire shows U.S. Treasury serious about tax fraud crackdown

By David Lawder

WASHINGTON, March 16 (Reuters) - The U.S. Treasury on Tuesday named Natasha Sarin, a Wharton School economist and protégé of former Treasury Secretary Larry Summers, to a key microeconomics policy post, where she will strengthen the Biden administration's efforts to boost tax revenue.

Sarin, an assistant law professor at the University of Pennsylvania, will bring expertise on tax compliance to Treasury as deputy assistant secretary for microeconomics in the Office of Economic Policy.

Sarin, 31, studied at Harvard University under Summers, who led the Treasury Department at the end of the Clinton Administration and served as the top White House economic adviser during the early part of the Obama administration.

Sarin and Summers wrote an often-cited paper in 2019 that estimates the tax gap - the difference between tax liabilities legally owed and revenues collected - at $7.5 trillion from 2020 to 2029.

"The sheer magnitude of the tax gap suggests that there is substantial revenue raising potential from shrinking it through well-targeted enforcement measures," they wrote. With "feasible" changes in policy, the IRS could aspire to shrink this by 15%, they wrote, generating an additional $1.1 trillion in revenue over a decade.

In an October 2020 opinion piece in the New York Times, Sarin said the wealthy, including former President Donald Trump, were not paying their fair share because the Internal Revenue Service has been deprived of resources in a "partisan attack" by Republicans that has "gutted" the agency.

The Biden administration is considering new taxes and other revenue-raising efforts to offset the cost of its next major spending bill to fund new investments in infrastructure, technology to fight climate change and education. President Joe Biden's $1.9 trillion coronavirus relief package was passed by Congress last week.

Treasury Secretary Janet Yellen has said tax increases would pay for part of the investment plan. nL1N2KO3J4

Sarin's work would support Lily Batchelder, who has been nominated to be Treasury's assistant secretary for tax policy. Batchelder, a New York University law professor and former Obama White House economic adviser, has advocated increased inheritance taxes to raise revenue and reduce racial inequality in the tax code.

Advisers to Biden's campaign said in October that stronger tax enforcement to go after wealthy tax cheats would likely be among the new president's first tax policy steps. The Treasury Inspector General for Tax Administration said last week in an audit report that the IRS should concentrate collection efforts in areas where there are more delinquencies among high-income taxpayers.

Sarin has not joined Summers' public criticism of Biden's $1.9 trillion stimulus. He has described the package as "way beyond what is necessary" and said it will fuel inflationary pressures. nL1N2KH2IT

The Treasury also announced other appointments on Tuesday, drawing staff from key Democratic allies in Congress, the Obama Foundation and Vice President Kamala Harris.

(Reporting by David Lawder; Editing by Heather Timmons and Paul Simao)

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