Beware the ides of April

Policy Review, Spring 1994 by Adams, Charles

Unfortunately, on the federal level, we live in a period devoid of protection. The recent history of constitutional law is a history of how to circumvent the limitations against unlimited federal power. As Washington has expanded the scope of its concerns, it has inflated the size of its budget--and the breadth and depth of its tax net. The growth of federal taxes--for the average household, a jump from less than 2 percent in 1948 to 24 percent in 1993--would have been inconceivable to the men who fearfully gave Congress the right to levy taxes.

A STRATEGY FOR TAX REFORM

The present administration, however, conspicuously lacks any fearful regard for taxpayers. Laura D'Andrea Tyson, head of President Clinton's Council of Economic Advisers, last year told a congressional committee that America is "an undertaxed nation." This seems to be the operating assumption of our intrusive and unwieldy tax bureaucracy, the Internal Revenue Service. Coupled with a massive, complex and onerous tax system, the IRS annually threatens each of us with tax audits, fines and jail terms.

What follows are some ways we can curb the most vicious aspects of our federal income tax system and help tame the tax monster:

Restrain the power of the tax man: Adjudicate tax disputes like any other debt. It is time to put an end to special laws giving extraordinary rights and powers to tax men. The tax collector is usually a creditor claiming money. He should have the same rights--and obligations--as any other creditor, and taxpayers should have the same rights and duties as any other debtor. If the tax man claims you owe, then he should have to sue you just like everyone else. Similarly, if you have paid too much, you should be able to sue the tax man and have the same status as any other creditor.

Indeed, the entire legal apparatus of the tax process operates in a world of its own, separate from the ordinary rules of law for settling money disputes. This is what got the Egyptians into deep trouble. The pharaohs lost control of their tax collectors--we know it because they were flooded with petitions complaining about abusive behavior and harsh penalties. The tax officials of the pharaoh were everywhere snooping, inspecting, recording, arresting. They even surveyed the nests of pigeons to count the eggs and make sure the pharaoh got his 20 percent.

Although we have abolished torture and other ancient enforcement rites, there are many abusive tax enforcement laws that put due process to shame. In a tax dispute, for example, taxpayers who want to challenge their tax assessment in a federal district court must first pay the disputed tax and then sue to get their money back. The counterpart of this is that you can't enjoin the collection of an illegal tax. If you can't pay--if the tax might destroy your business or take away your home or livelihood--that is too bad. Bankruptcy offers no relief as it does for ordinary debts.

There are over 150 penalty provisions to trap and punish you for just about any error or slip up, no matter how excusable, that you may make in dealing with the vast jungle of tax rules and regulations. Penalties often exceed the taxes owed, adding a kind of audit-terrorism to the system. The General Accounting Office reports that the IRS can't manage this vast web of entrapments, and that 44 percent of all penalties assessed by the IRS are wrong. If this is true, how many are wrongly paid by taxpayers wanting to get the tax man off their backs?