Taxpayer's Bill of Rights Not Answer


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Legislation

Taxpayer's Bill of Rights Not Answer

By: A.J. Cook

Why are collections at the Internal Revenue Service way down?

Because a few years ago, Congress, in a knee-jerk reaction, adopted the Taxpayer's Bill of Rights. Emotionally wrought taxpayers had told the legislators horror stories in lurid detail about mistreatment by rogul IRS officers.

Did the new law stop harassment? Probably. But it did much more. It put a damper on tax collections -- and surely increased tax avoidance. By taking the pressure off, some citizens see an opportunity to cheat.

The legislators acted on their (or the public's) emotions with little or no in-depth research.

They should at least have solicited testimony from tax practitioners, who could give answers better than anyone. They are on the front line of the tax wars daily and would have anticipated the obvious damper on collections.

They probably would have told Congress to appoint an independent arm of the government to investigate unethical and criminal behavior by IRS employees and publicize the results.

Taxpayers are punished for misdeeds. They should know IRS employees are also punished for misdeeds.

Consider another example of a law passed based on emotions without adequate research; the Alternative Minimum Tax. Some enterprising reporter had discovered 299 high-income filers didn't pay any taxes. So Congress passed the AMT that uses an extremely complex formula to make sure no one escapes taxes.

Few people stopped to think why these millionaires didn't pay. The answer is, they used incentives Congress had provided. For example:

Taxpayers bought machinery and buildings for tax credits and fast deductions. Congress wanted to spur the economy.
Taxpayers made large contributions to charities. Congress knew this would encourage donations.
Taxpayers paid large amounts in foreign taxes. Congress didn't think it was fair for people to pay taxes twice on the same income.
Taxpayers bought city and state bonds and received large amounts of tax-free interest. Congress wanted to encourage investment in our nation's states and municipalities.

Now that middle-income taxpayers are being hit by the AMT, emotion is building again -- this time to change the law. Don't change it -- toss it. The law was ill-conceived: It worked on the symptom rather than the cause.
Both the minimum tax and the Taxpayer's Bill of Rights are bad laws. Correct the Bill of Rights and trash the Alternative Minimum Tax and all the other misguided laws on the books.
The Moral: Make tax laws in the haste of passion and repent in leisure.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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