DO ONLY SUCKERS PAY TAXES?
I’ve always thought of taxes as the price of civilization, and while grumbling along with everyone else about the tax codes complexity, I have never felt anything but pride in my ability to contribute larger amounts to our shared enterprise. Once, when I was audited, I was particularly proud of the fact that the only mistakes found were in the government’s failure. I ended up with a small refund!!
For many years, I think the vast majority of citizens shared my view. In recent years, however, the number of people who disagree with the existence, intent or performance of the government has increased dramatically and as a consequence, there seems to be growing acceptance of tax evasion and a near constant chorus of calls - often from very wealthy people – for lower tax rates.
In my view, a collective disdain for tax compliance threatens both our solvency and our form of government. In a large country like the US, where most people do not run for public office or otherwise participate actively in governance, preserving representative government depends, at least in part, on sustaining the rituals of participation that establish a common interest. In years past, one of the most important of those rituals was mandatory military service, which touched virtually every family’s life directly or indirectly. Mandatory service has given way to a volunteer military about which most of us know very little and with which we have little interaction.
Another weakened ritual is voting. In the most recent Presidential election, only 58% of eligible voters bothered to cast a ballot; 90 million citizens simply didn’t bother and by implication, care little about voting rights.
One of the most important remaining rituals is obeying our tax laws, which rest on a presumption of compliance. Unhappily, the Congress – which levies taxes and should seek to encourage honest tax reporting – seems intent on making tax compliance a “suckers only” game. In addition to echoing calls for lower taxes, lawmakers have been gradually eviscerating the IRS, which is no longer capable of enforcing our tax laws. In 2014, the latest year for which I could find records, the IRS audited less than 1% of all returns, and only 16% of those returns which reported income of more than $10 million. The reason is simple: fewer auditors. In 2016, enforcement staffing fell to less than 16,000, fewer than were on the job back in 2010.
The lack of investigative manpower leads, inevitably, to widespread tax evasion. Following each of the last several Presidential elections, one or more cabinet appointees have been revealed as having failed to pay taxes on household help. Last year, fewer than 200,000 taxpayers paid these taxes, a number implying massive non-compliance. It doesn’t seem to matter to these evaders that the helpers will end up, years in the future, without the retirement benefits everyone needs.
In addition to doing far too few audits, the agency is doing fewer investigations of identity theft, money laundering, and public corruption. Moreover, taxpayers seeking IRS assistance increasingly find their written queries unanswered and the agency’s telephones unmanned.
None of this makes sense, since we have a huge tax gap – the difference between the amount paid and the amount owed – and the IRS is extremely efficient, spending just 35 cents to collect every $100 of revenue collected. Moreover, incremental spending produces huge incremental gains: for every $1 spent on additional agents, the government recovers $4 of additional revenue. And the government needs the money. Last year’s budget deficit was $587 billion, but more than $450 billion in taxes went uncollected. Collecting the money due but unpaid would nearly eliminate the deficit and free up funds that are needed to improve our infrastructure, improve health care and revitalize our educational system.
Unhappily, things seem to be getting worse, not better. The Trump Administration has proposed a 14.1 percent cut to the IRS for the fiscal year that begins in October, which would reduce the agency’s budget to about 70% of what it was six years ago. If that proposal becomes reality, agency effectiveness will decline still further.
I don’t understand why our government follows policies seemingly designed to minimize tax collections and create a nation of scofflaws. In years past, Americans mocked countries unable or unwilling to collect taxes; today, we seemed determined to emulate them.
There will always be disagreements about what roles government should or should not take on. But if we want to sustain self- governance, we need to recognize that doing so requires adherence to the rule of law, including calculating and paying all the taxes that are due. Only by doing so can we be sure that citizens who pay their taxes will see themselves as patriots, not suckers!!!!