By: A.J. Cook


When the average motorist is stopped for speeding, he often says: "Why aren't you out arresting murderers and burglars, instead of bothering an ordinary citizen like me?"

And when the average taxpayer is called in to justify a small deduction, he often says: "Why aren't you out collecting taxes from Mafia bosses and drug dealers, where the real money is?"

Now the Internal Revenue Service is under fire for doing just that: pursuing bad guys working in drug rings, money laundering and organized crime. The most visible criticism comes from former IRS Commissioners and a tax policy subcommittee of the American Bar Association. They challenged the IRS participation with other government agencies in covert activities with such names as Operation Greenback and Operation Bancoshares.

The agencies grab crooks, headlines and lots of tax money. No dime novelist could come up with plots as colorful and devious as the true tales.

One operation targeted the Bank of Credit and Commerce International headquartered in Luxembourg with a branch in Florida. The agents wanted to entice European bankers involved in money laundering to America. The authorities staged a grand wedding of two U.S. Customs officers who had infiltrated the illegal activities. The suspects received engraved invitations. Government agents, posing as chauffeurs, drove the visiting bankers to downtown Tampa, Fla., for a party the night before the wedding. When they arrived the bankers didn't find a bevy of beauties ready to celebrate a bachelor's last night, but U.S. agents ready to arrest them.

In Operation Greenback, agents tracked two men carrying large brown bags from bank to bank, then returning to an alleged drug dealer's apartment. The brown baggers weren't eating lunch, they were depositing just under $10,000 cash in each bank. All of this to avoid the IRS form required from banks for cash deposits over $10,000, a form used to ferret out cash-intensive illegal drug operations.

The critics aren't complaining about the success of these multi-agency operations. Their criticism relates to the IRS's diversion from its principal purpose: to encourage -- sometimes intimidate -- the voluntary payment of taxes. If ordinary Americans refuse to pay voluntarily, the system will break down under the weight of investigations; tax collections would slow down and the federal government couldn't operate.

The IRS criminal enforcement division, second only to the FBI in size, was established to target criminals who don't report illegal income and cheaters who fraudulently underreport their legal income. In recent years emphasis shifted to collecting illegal income. According to government figures, in 1980, 71 percent of investigation time related to legal income; by 1990 this dropped to 53 percent, with illegal income absorbing the emphasis shift. Critics say slighting fraudulent cheaters with lawful income in favor of the big time, big headline criminals, hurts overall tax collections.

Just before he left office in January, Commissioner Fred Goldberg said the IRS considered the criticism and decided illegal money investigations are "not only necessary but wholly appropriate." Still, he acknowledged, the lack of resources to investigate tax evasion from legal income is a major factor in the decline in voluntary compliance.

Everybody likes to see drug dealers and crime czars fall. But too much emphasis on criminal activities creates the impression it's safe to cheat. Someone who had that impression, now in prison for tax fraud, is hotel magnate Leona Helmsley.

The Moral: Banking on not getting caught in a tax scheme may get you bagged by IRS.