Jay Soled (Rutgers Business School) has published Homage to Information Returns, 27 Va. Tax Rev. 371 (2007).  Here is the Conclusion:

Consider for a moment the implications were Congress to eliminate the requirement that third parties issue information returns. On the one hand, employers, banks, and brokerage firms might applaud this change as it would relieve them from the burden of having to expend time, money, and energy collecting, processing, and distributing this information to taxpayers and the government. On the other hand, if existing studies accurately depict what happens in the absence of information return issuance, taxpayer compliance would probably hover around 50%, seriously jeopardizing the Code’s administration. A necessary by-product of rampant taxpayer noncompliance is that the federal government and many state governments would have to slash their budgets, run deficits, raise their taxes, or institute a combination of the foregoing. This outcome would be neither economically stable nor politically tolerable.

Notwithstanding the draconian outcome were information return issuance eliminated, Congress cannot be overzealous in its information return expansion endeavors. As previously indicated, the issuance of such returns is not a cost-free endeavor. Certainly, the burdens associated with compliance have to be carefully weighed against the benefits they produce. In many cases, particularly in light of technological changes, the putative benefits far outweigh the putative costs–these are the areas in which Congress should focus its expansion efforts.

In the end, no one should sell short the importance of information returns. Information return expansion, along with the institution of other reforms, can enable the government to make great strides in its goal to close the tax gap. If Justice Oliver Wendell Holmes is correct and “taxes are what we pay for civilized society,” the issuance of information returns represents a welcome bridge to help deliver us out of our state of savagery. Fortunately, technology now affords Congress the opportunity to add an extra lane or two to the existing bridge.