If you had a choice between fighting Mike Tyson and participating in the Internal Revenue Service’s Taxpayer Compliance Measurement Program, you’d be wise to climb into the ring. With Tyson, your suffering would be brief. Not so with the IRS.
The agency’s fearsome “superaudits,” which make an ordinary audit look like a Caribbean cruise, have been used by congressional Republicans as a symbol of government oppression, which of course they are. So there was satisfaction on Capitol Hill when the IRS last month announced that it was scrubbing plans to conduct 150,000 of these inquiries on people chosen at random over the next three years.
The good news for Republicans, unfortunately, was also exceedingly good news for tax cheats, whose lucky break comes at the expense of upstanding citizens. Republicans are supposed to specialize in new ideas. In this case, they showed a conspicuous lack of imagination.
A superaudit is something you wouldn’t wish on Saddam Hussein. The taxpayer has the obligation of proving every claim on her tax return–starting with a marriage certificate to justify a joint return and detailed records to document every nickel of income and deductions.
It can take a week or more. It may require the help of a professional. It is highly intrusive. It carries the threat of criminal penalties. It can drive a teetotaler to drink. One unlucky target described it as “an autopsy without the benefit of dying.”
But it also serves a vital purpose: making sure that Americans pay what they owe. The superaudits are the IRS’ only real way to find out all the tricks people use to evade taxes, providing the agency with essential tools for determining how to catch them. The data compiled from the program gives the IRS a good idea who needs regular audits and who doesn’t, which allows it to maximize its cost-effectiveness and minimize the burden on innocent taxpayers. Congress’ General Accounting Office, in a recent study, said there is no other source of information that “would allow the IRS to target its audits as effectively” as this one.
A few years ago, the superaudits found that some taxpayers were claiming exemptions for dependents who, strictly speaking, didn’t exist. So the IRS began requiring parents filing returns to supply the Social Security numbers of their children. The next year, the number of children in America suddenly plummeted by 7 million.
That, unfortunately, was not the sole method that inventive people have devised to shortchange the IRS. The government estimates that only 83 percent of Americans remit all the federal taxes they owe. Among independent contractors–self-employed individuals not subject to withholding, who often have a mysterious preference for payment in Federal Reserve Notes–compliance may be less than 50 percent, according to former IRS commissioner Donald Alexander. The average American enjoys the privilege of paying $1,100 in taxes each year to make up the shortfall from tax dodgers.
The superaudits are a large part of the effort to reduce that figure. But Republican criticisms of the program are well-founded. So what to do? The GOP treated this as a zero-sum game. Congress simply cut the IRS budget, which forced it to abandon the plan.
But there was an obvious way to address the objections of critics without depriving the IRS of a crucial tool. Putting a taxpayer through a superaudit is harsh and oppressive, but so is razing someone’s home to build a highway. Governments do the latter all the time, and no one objects. The reason is that homeowners are fully compensated for their misfortune. The government pays them a fair market price for their home so they can buy another one just as good.
The U.S. Constitution requires such payments in the 5th Amendment, which says that private property may not be taken “for public use without just compensation.” The principle is that if individuals are made to suffer for the benefit of society at large, society at large has a duty to make it up to them. In this case, the logic argues for paying money to those wretches who have to endure a superaudit–compensating them not only for their out-of-pocket expenses (as the House tax bill would have done) but also for their time and aggravation.
That wouldn’t make the experience a pleasure–you don’t see homeowners volunteering to make way for new highways–but it would greatly soothe the pain. It would also have the benefit of forcing the IRS to take into account the burden on taxpayers in deciding how often to conduct superaudits and how many people to conscript.
It’s not hard to find a way to protect individual taxpayers without doing a favor for tax cheats. Too bad no one was looking for it.
