NCPA - National Center for Policy Analysis

Complex U.S. Tax Code Invites Arbitrary Enforcement

February 23, 2000

In the 18th century, Adam Smith wrote that when the laws are uncertain, "we are all more or less in the power of the tax gatherer."

The beauty of the flat tax, its proponents say, is not just that it will speed up and simplify the whole process, but that it will protect taxpayers against arbitrary interpretations of the tax code by an army of Internal Revenue Service auditors. In other words, it would help secure taxpayers against a trampling of their rights.

Right now, the tax laws are so complex and uncertain that they constitute a threat to taxpayers' rights, critics say.

  • Every year the editors at Money magazine give copies of the same family's tax documents to dozens of different professional tax preparers -- and every year those preparers return dozens of different results.
  • Less than 1.5 percent of all filers claim a deduction for their home office because that is one of the most notorious red flags inviting an audit -- which signals that many taxpayers would rather overpay the government than fight the IRS in this most gray of gray areas.
  • Dropping its several-year pretense at "customer service," the IRS has gone back to emphasizing aggressive enforcement of the nation's voluminous and bewildering tax code.
  • To achieve that IRS goal, the Clinton administration wants a $769 million addition to its $8 billion budget -- in order to hire 633 more auditors to go after "individual returns with over $100,000" in income.

Political observers contend that tax disillusionment translates into political disillusionment. Polls show that Americans would rather pay down the national debt than enjoy a tax cut. The reason may be that cuts alone are seen as more fiddling, more confusion and more intrusions.

The whole mess could be cleared up by adopting a flat tax.

Source: Amity Shlaes, "The Best Flat Tax Argument: The IRS," Wall Street Journal, February 23, 2000.


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