The sponsors of AB 2570 – a flawed proposal to deputize profit-seeking attorneys to engage in tax collection – continue to claim that California has a $20 billion “tax gap,” despite being alerted that the that number has no basis in fact.

The “tax gap” is the estimated difference between what taxpayers owe under the law and what they actually pay. The $20 billion claim was used in the AB 2570 proponents’ press conference and social media posts, and appeared again in the analysis for this week’s hearing of the Assembly Judiciary Committee, which is chaired by the bill’s author. The analysis states that the Franchise Tax Board estimated the tax gap to be $20 billion to $25 billion in 2019, and cites the figure again after noting that it “has since been removed” from the FTB’s website.

The analysis does not explain that the figure was removed from the FTB’s website because the tax agency determined it could not be substantiated.

It is disappointing that proponents of this bill continue making false claims rather than admitting they have been relying on a “statistic” that doesn’t exist.

In February, CalTax asked the FTB how its tax gap estimate was calculated, noting that the agency’s website then indicated the figure was based on a dated IRS report on federal taxes. The FTB responded: “Thank you for bringing this to our attention. As FTB looked through our archives, we were not able to determine a reference point for the $20 – $25 billion. We will remove this statement to ensure further confusion does not occur.”

The FTB did the right thing by taking immediate corrective action to ensure that the public and elected officials are not misinformed as the Legislature considers AB 2570.

This legislation proposes extending California’s False Claims Act to issues already enforced by the tax agencies. The False Claims Act allows profit-seeking lawyers to sue individuals and business owners and collect damages if they win. The law currently doesn’t apply to tax disputes because state tax agencies already aggressively enforce these laws, using their special access to the confidential financial information of businesses and individuals.

Supporters of AB 2570 make the false claim about California’s tax gap in an effort to mislead people into thinking the legislation would result in a revenue windfall for the state.

Any estimate of the tax gap should be examined closely to determine, among other things:

California’s aggressive, high-tech tax collectors are experts at catching and punishing tax cheats, and their work benefits all law-abiding taxpayers. There’s no need to change things simply to benefit the profit-seeking lawyers who are supporting this legislation. This bill is not only unnecessary, but is also a distraction from the COVID-19 relief that lawmakers should be focusing on.