Coming from the top, the news is startling. Internal Revenue Service commissioner Charles Rossotti told the Internal Revenue Oversight Board this week that the federal tax system is "on a serious long-term downtrend" and that tax cheats are prospering as never before.

In his end of term report, Rossotti told IRS Oversight Board members that despite significant improvements in the management of the IRS, the health of the federal tax administration system is deteriorating.

The source of the problem, he said, is two conflicting long-term trends--increasing demands on the tax administration system due to rapid growth in the size and complexity of the economy, and a steady decline in IRS resources due to budget constraints. The effect of these trends over a 10-year period has been to create a huge gap between the number of taxpayers who are not filing, not reporting or not paying what they owe, and the IRS's capacity to require them to comply.

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