AN EASY DOSE OF PATRIOTISM

The New York Times editorialized this week that everyone’s Income Taxes should be public information.  I think it’s a great idea, and I hope the House will soon pass legislation requiring it.  The Senate will naturally defeat it but forcing Senators to vote for secrecy and against transparency is a great way to underscore their continuing hypocrisy about all things regarding taxes.

There are solid reasons for making information about income and taxes public.  For one, knowing more about what others make would give us all a better understanding of how severe income and wealth inequality has become. The Times reports that in Finland, where individual tax data is published annually, an analysis of the data is part of the political process of deciding how much inequality the country is willing to accept. Sounds like a first-rate plan!

More information about what others make would also have an impact on inequality itself.  Knowing what others make will enable the capable and aggressive to build a far better case for increased rewards than is possible without information on competitive earnings. Additionally, transparency would have a positive impact on compliance, since people are not likely to under-report either income or taxes when doing so amounts to a public admission of ineptitude.   And transparency would encourage compliance since most people want to be honest and would rather not suffer the social shaming associated with being caught  cheating.  

Making information about taxes public isn’t as radical an idea as you might think.  In the years following 1861, when Congress first imposed the tax to finance the Civil War, the government collected income and tax information by name, and until the early income tax laws were repealed in 1872, newspapers often published the information.  Income taxes reappeared following the adoption of the 16^th Amendment in 1919 and in 1924, the government grew so concerned about tax fraud that it decided to make information about taxpayer income and taxes available for inspection. Predictably, wealthy taxpayers lobbied Congress to reverse the rule, and secrecy has prevailed since.  And again, the results have been predictable. 

These days, tax compliance is a joke.  Less than 10% of household help – whose employers are legally obligated to pay the employer portion of Social Security and Medicare taxes – are paid “on the books”.  Congress – for reasons that can only be based on cowardice and corruption – has consistently underfunded the IRS and as a result, the government loses an estimated $450 Billion owed but uncollected annually.  By closing our eyes to these enormous revenue losses, and by ignoring the adverse moral and ethical impact of non-compliance, we are seriously undermining our country.  For many years, paying every dollar due was regarded as a patriotic duty.  Unhappily, the chances of being audited are now so remote that people who pay their taxes are increasingly regarded as suckers rather than patriots. 

For decades, Americans have ridiculed the non-compliance of citizens of other countries. It’s time for all of us to reclaim the pride of patriotic compliance.  Tell your Representatives and Senators you expect them to encourage full tax compliance by fully funding the IRS, making clear that full compliance is expected from everyone and publishing tax information to prove its all happened.