$2 Billion a Year Lost to Income Tax Fraud, State Says

California taxpayers bilk the state out of an estimated $2 billion a year, mostly by not reporting income, making fraudulent deduction claims and improperly reporting property sales, the state says.

The figure represents more than 10% of the personal income taxes collected in the state, or about 4% of the total budget, and is viewed as a significant loss in a recession-plagued budget year marked by dwindling revenues and spiraling demands for social services. About 14 million state tax returns are expected to be filed for the 1991 tax year, including returns by single taxpayers, married couples filing separately and married couples filing jointly.

“There is a major revenue gap between what people owe and what they actually pay,” said Jim Reber, a spokesman for the Franchise Tax Board. “There is no doubt that we’re losing $2 billion a year. We’ve been talking about this for a decade.”