The State of Tax Administration in the US:Legacy Systems Meet the Economics of the 2020s

• In Event: Future Challenges in Fiscal Federalism

Abstract

Local Tax Administration in United States remain poorly equipped to manage the complexities of the economy of the early/mid-21st Century, this paper identifies seven critical gaps that collectively undermine effective tax governance: data, resource, tax, knowledge, technology, policy, and political gaps. Each represents a structural deficiency, whether in funding, staffing, technological modernization, or policy alignment. The analysis reveals that despite technological progress and organizational efforts, tax agencies continue to struggle with outdated infrastructure, workforce attrition, inconsistent data systems, and a growing tax gap caused by noncompliance. These issues were magnified during the Great Recession, which intensified fiscal pressures and exposed inefficiencies in tax collection and enforcement. The paper calls for systemic reform, including enhanced information sharing, long-term succession planning, improved taxpayer services, and investments in digital infrastructure. Furthermore, it stresses the importance of cross-sector collaboration—among tax administrators, legislators, and citizens—to create resilient and adaptable tax systems. Without such coordinated efforts, states risk diminished revenue capacity and the erosion of essential public services.

Author

• Billy Hamilton