THE POWER TO DESTROY
By William V. Roth Jr. and William H. Nixon
Atlantic Monthly Press, 290 pages, $23.
THE GREEDY HAND
By Amity Shlwas
Random House, 255 pages, $22.95
One day in 1993, Margaret Richardson went to the mailbox at her home. There she found something that greatly disturbed her: an envelope from the Internal Revenue Service. “I had to stop and shake a minute before I opened the envelope,” she recalled later. Nothing terribly unusual–except that at the time, the veteran Washington lawyer was the new commissioner of the Internal Revenue Service. The envelope contained her first paycheck.
Federal tax collectors strike fear in a lot of Americans, even those who never worry about getting crosswise with the FBI, the local police or the Drug Enforcement Administration. Most people can manage to obey the law almost all the time in their normal activities–and if they break it, they do so intentionally. But the Internal Revenue Code, which is twice as long as “War and Peace,” has grown so vast and complicated that even the most upright citizen can never be sure of staying in compliance.
Professional tax experts have the same problem. U.S. Senate Finance Committee Chairman William Roth (R-Del.) notes in “The Power to Destroy,” written with his aide William Nixon, that when Money magazine got 46 tax preparers to figure the tax liability of a hypothetical family, no two agreed, and the range of calculations ran from $34,000 to $69,000. The income tax code makes it possible for almost anyone to be adjudged a criminal, anytime. For a people that generally prides itself on obeying the law, even the tax law, that fact induces chronic queasiness and resentment.
Roth and Nixon think something more is warranted: outright fear. Their book, drawn from material compiled by Roth’s committee in its 1997 hearings on IRS practices, amply documents why. They tell about the businessman who was driven to suicide over a $2,600 dispute, and whose grieving family was then harassed for even more money after his death. There is the battered wife who was held responsible for her husband’s tax debts after he went to prison even though she knew nothing about their tax returns (IRS agents, she marvels, ” `simply do not accept that being beaten senseless on a regular basis affects your ability to deal with your husband’s money and records’ “).
And we read about the instructor who counsels collections officers how to deal with people who owe the government money: ” `Make them cry. . . . We don’t give points around here for being good scouts. . . . If you’ve got an assessment, enforce collection until they come to their knees.’ ” Roth reports that the instructor, despite being captured on a damning videotape, is still teaching agents his gentle secrets.
Skeptics may complain that Roth makes no apparent effort to get the IRS side of these stories. But he finds plenty of present and former agency employees who depict it as lawless and abusive. A division chief who spoke on the condition that he not be identified told Roth that he frequently goes ” `beyond the point of what is legal.’ ” A survey of agency managers found that only one in three thinks there is a duty to be truthful in dealings with citizens.
The Finance Committee hearings bore fruit in the form of legislation passed in 1998 that creates a new board to oversee the IRS, establishes a national taxpayer advocate, and shifts the burden of proof from the taxpayer to the agency in court proceedings if the taxpayer has acted reasonably. Commissioner Charles Rossotti has responded by promising to do better.
“The Power to Destroy” does a workmanlike job of exposing an agency that seems to regard the American people as the enemy, while avoiding hysteria and hyperbole. Its chief weakness is its implicit faith in the solution Congress devised. The remedies enacted in the wake of the Finance Committee investigations look well-intentioned and possibly useful–but measured against the abuses Roth and Nixon identify, pitifully inadequate.
Amity Shlaes, an editorial writer for The Wall Street Journal, argues that the evils in our tax system go beyond rogue IRS employees or even the income tax. In “The Greedy Hand,” she provides a concise layman’s guide to the many problems created by existing tax policies. Readers familiar with the Journal’s take-no-prisoners polemics may be surprised to find that her conservative outlook is refreshingly free of dogma and that occasionally, as in the case of the “marriage tax,” she acknowledges the elusiveness of perfect answers. Even those who reject her conclusions can be grateful she has managed to make a volume on tax policy not merely accessible but briskly entertaining.
Shlaes wants to illuminate how taxes shape, or rather warp, behavior, from fostering overinvestment in housing to discouraging the use of day care to creating the gargantuan Mall of America in Minnesota. Why did it sprout there? Because of tax breaks the developer got from the city of Bloomington and because the state does not tax the sale of clothing. That advantage, Shlaes reports, has helped make this 520-store shopping mecca the most popular tourist destination in America.
The author skillfully dissects the Social Security system, the estate tax, and the property tax as a source of funding for public schools. This last tax, much denigrated for allegedly producing great inequities, is one of the few Shlaes likes–“a fee-for-service arrangement disguised as a tax,” according to one economist. For all its imperfections, she says, it serves the critical purpose of giving taxpayers a huge stake in their local schools. She is not so sanguine about the income tax, whose complexity forces Americans to pay $40 billion every year for tax help, much of it to H&R Block, which she informs us now has 8,554 offices. Throughout, she argues for lower taxes and simpler ones, which would not only boost economic growth but quell the sense that we are being taxed without our consent.
Her real complaint, though, is that the existing tax system is so “meddling, bossy, intrusive. Today our tax code doesn’t stop at merely taking its share. It also wants to tell people how to live. . . . (I)t pervades, dampens, and makes knots of our lives.” A society in which every decision holds out the prospect of a tax reward or a tax penalty is not as free as it ought to be. When we make decisions about marriage, child-rearing, place of residence and all sorts of important matters, Shlaes shows, we find ourselves pushed, sometimes gently and sometimes not, in one direction or another by the tax man.
The real value of “The Power to Destroy” and “The Greedy Hand” is to remind us that taxes are not just a matter of dollars and cents. How we tax ourselves–or rather, how we let ourselves be taxed–has a great effect, whether we realize it or not, on how we live. To a large extent, Americans have become the often-fearful servants of a tax system that we neither understand nor control. If gaining understanding is the first step toward restoring control, we may all someday be indebted to these authors.
