Tax experts say that billions of dollars in potential tax revenues go unreported and uncollected, largely because Americans are dissatisfied with government.

• Estimates put the loss of yearly revenue from federal tax evasion anywhere from $71 billion to $127 billion.

• The "tax gap" -- the difference between what is due and what is paid -- rose steeply during the 1987-92 period, from $71 billion to $94 billion.

Bruce Bartlett, senior fellow at the National Center for Policy Analysis, says that the IRS believes the current gap is between $110.1 billion and $127 billion. Bartlett estimates that three-quarters of the individual tax gap comes from unreported income, mainly from self-employment.

• The IRS believes the bulk of unreported operations are in businesses like taxis, limos and other transport services; used car sales; roofing construction; direct sales; auto repair and child care.

• Legal, but unreported, underground income soared from $75 billion to $100 billion in 1972, to almost $600 billion in 1992, experts estimate.

• In 1972, lost government revenues from evasion were only $30 billion -- a fraction of what they are today.

Comparing the tax gap with income tax rates, Bartlett found that "as the income tax rate rises, unreported income tends to rise; and as tax rates fall, so does unreported income." Other research shows that public dissatisfaction with government is another strong factor in evasion.

The underground economy is a fast-growth sector -- increasing about 8 percent a year, compared with 3 percent for legitimate businesses. Figures on the underground economy do not include activity in the truly criminal world, which would add another $200 billion or so according to knowledgeable estimates.

University of Colorado economist James Alm estimates that if tax rates increase 10 percent, the amount of tax cheating increases 3 percent to 5 percent, since there is more to gain from cheating.

Some have suggested scrapping the income tax and replacing it with a national sales tax, which would presumably eliminate the problem. But Bartlett says a national sales tax would introduce other problems, such as increases in state taxes and calls for rebates to lower-income families -- creating another entitlement program.

Source: Thomas McArdle, "Cheating Uncle Sam At Tax Time," Investor's Business Daily, April 26, 1996.