The Tax Cheats
Every spring we are subjected to a ritual relating to the ‘income’ tax. The typical program involves sappy, good-natured moans and groans about the pain and complexity by ‘good-government’ newspaper editors; a few noises in Congress-- maybe a hearing or two-- about IRS heavy-handedness; and prominent coverage of a couple of threatened indictments or prosecutions of citizens for "cheating" on their taxes.
Sometimes that "cheating" will amount to evasion, (trying to evade taxes on what one believes to be actually taxable), but more and more in recent years the stories concern citizens who have simply stopped playing along with what they see as an illegitimate exaction. These persons do not necessarily oppose taxes per se, but they perceive serious legal problems with the income tax, and stand up to act on what they believe. The views of those of whom I speak are not always solidly grounded, but all are sincere in their beliefs and positions. To characterize such persons, who quietly and cooperatively pay large amounts of money in other types of taxes every year, as "cheats" requires a ludicrous stretching of definitions, particularly considering the promiscuous excesses of tax collection and expenditure.
The essence of the "cheat" charge directed at such folks is that such a protestor is guilty of making some other poor tax-payer pony up more than his share of this year's federal subsidy to the Coca-Cola company’s overseas sales efforts, or the latest NEA performance-art grant (and only to the extent that those boondoggles are funded by ‘income’ taxes, as distinct from other types of taxes). However, the reality is that other poor tax-payer's rates did not in fact go up in response to such a protestor’s actions. If one examines the stats, one finds that tax rate increases are related to spending increases, either before or after the fact, and not to collection shortfalls. Thus, even the sub-text of these "cheating" charges is bogus.
(I suppose a desperate partisan could say that Coke is being cheated, because they’re having to do more lobbying to get the same snout time out of a slightly smaller trough. Cry me a river.)
Personally, I define cheating as acquiring something that you have not earned, primarily through fraud or trickery (Webster does, too). By this standard, the cheating going on with regard to the ‘income’ tax is on the part of everybody associated with the system except the hapless protestors being singled out for attention. A few examples:
The "Progressive" Cheats
The most common and numerous type of tax cheat is the progressive cheat, the one who pays less than some of his (or her) neighbors (or even collects a "refund" of more than he paid) while demanding and using the benefits thus financed, arguing that those neighbors can afford to carry the progressive on their backs better than the progressive can afford to pay his own way. This type, we must assume, also shoplifts and steals from his employer, using the same logic to compare his resources with those of his victims.
The progressive cheat seeks moral cover with vague arguments about "the lottery of life", or that the well-off benefit more from government. This is self-serving nonsense, of course--the fact is that the better-off a citizen is, the less they use government services, which are almost always inferior to those available in the private market. It is the "progressive" that uses the services, and smugly too, believing them to be a bargain at the rates he is being charged for them, and himself a pretty clever fellow, indeed.
As for the lottery of life thing (leaving aside the fact that the lottery seems to strangely favor those who work hard, take productive risks, and defer gratification), it is the argument of two-year-olds-- "It’s not faiiiirrrr!!" Not exactly the kind of scrupulously careful and philosophically solid argument by which one would like to imagine the forced disposition of an innocent citizen's private property will be decided.
Both rationalizations bear a strong whiff of a paranoid suspicion that the better-off have somehow colluded with corrupt officials or acquired their resources by other foul means and the progressive has been left out of the game. If this is true, (and in a lot of cases it is), the aggrieved progressive should be clamoring for prosecution of those involved and a massive reduction in the size and power of the state, rather than trying to set up shop in the same line of work.
That these "corruption" arguments are misdirected won’t stop the progressive cheats from mumbling them, of course. They serve to keep the stunted consciences of the smarter ones quiet, and provide the dumb ones a sense of self-righteousness while both varieties belly up to the trough. Most importantly, they serve to keep the victims of the scheme in a state of moral and legal confusion.
The simple fact, unadorned with sophomoric social theory and juvenile emotionalism, is that the progressive, by dint of superior numbers, forces his neighbors to pay for benefits that they don’t want or use but that he does, or to subsidize his enjoyment of those benefits by being overcharged for their own.
In deploying dishonest arguments the progressive seeks to mask that simple reality and to further swell the ranks of his allies, thereby securing more power by which more of the same can be done. He is engaging in fraud to claim benefits unearned and unpaid for. He is cheating.
The Professional Cheats
For more than ten years, Money Magazine has annually submitted identical tax information to as many as 50 top professional CPA’s and tax specialists and every year they have received back different tax returns from each. At best, all but one of them are wrong, and it is reasonable to extend that status to virtually every tax return submitted every year. Despite this, even in years in which "tax enforcement" is vigorous only a tiny percentage of returns are challenged and changed.
We can conclude several things from this massive inaccuracy and institutional acceptance of the same: First, that nonetheless enough swag pours in to sate the appetite of the state, or at least to approach the threshold beyond which improvement (and the risk of increased resistance) is more trouble than it’s worth.
Second, that it is either not possible to deliberately achieve accurate compliance with tax law, or the IRS doesn’t care if you do as long as you're letting them have your money; and third, the "pros" that take money in exchange for their expert guidance through the thickets of tax compliance are each and every one of them swindling their customers, taking their money and delivering nothing of real value, and professing to an expertise that is a lie.
Some of these "pros" do their thing in the rather pitiful fashion of one who would sincerely do a good job if it was both within their abilities and technically possible, but, faced with the failure of those requirements still takes the customer’s money and muddles along telling themselves that they’re doing their best. Privately, in the back of their minds they are thanking their stars to have not yet been caught out as an incompetent. This type of "pro" is almost a victim himself, for he mistakenly believes that it is possible to do his job properly, if only he could figure out how.
More common are those so deeply cynical and morally corrupt that despite knowing that a proper job cannot and need not be done by themselves, their clients, or anyone else, they are able and willing to make that deal, pocket that fee, and carry on. They know that at least 9 out of ten times the work for which they will take their client’s money will either fall short of minimizing the alleged tax liability or cross the line into ‘unallowable’ territory, yet they are untroubled. Hey, it’s the way the game is played. Some number of their clients are not victims, of course, but rather equally cynical co-conspirators who understand that the ‘expertise’ for which they are paying is that of knowing what flights of deductive fancy enjoy acceptable odds of being un-remarked-upon, or at least explainable, at an audit.
The best that can be said for either variety of parasite is that what they are really selling to their clients is stress-relief and a sort of talking-point indemnification against criminal charges for certain categories of tax ‘crime’. Should the ordeal of scrutiny fall to one such in any given year, that client can point the finger at the ‘professional’ for certain types of ‘errors’, and thus provide themselves a little cover.
In other words, like snake-oil salesmen or protection-racket fixers, the "pros" are mostly selling peace-of-mind against the dangers of bureaucratic abuse. In claiming or implying that they are actually providing compliance with the tax laws, they are cheats. They have no expertise with the tax code, they only have expertise (and/or a relationship) with the tax enforcers.
(NOTE: In March 2002, Jerry Padway of the American Institute of Certified Public Accountants called for more tax audits of the American people, claiming to seek thereby increased public confidence in the tax system. He did not trouble himself to mention that more audits means more pre- and post-filing customers for the CPA industry).
There is also, of course, the "secretarial" type of tax-preparer, catering to clients who basically just want to send in the form without being screwed too badly. (Advertising copy using terms like ‘accurate’ and ‘guaranteed’ notwithstanding, no one but the supremely gullible would imagine that for $100 they would get an accurate, maximized tax return taking full advantage of every clause and quirk in that 29,000 page code, but hey, caveat emptor...)
This last kind of "pro" cheating is of the work-a-day, "this is the way the world goes around" kind-- participating in, and getting a paycheck from, the corrupt system. As in the case of the higher priced types cited above, these "professional" cheats are like someone who stumbles across a mugging and promptly sets up a concession stand; they are simply more modest in their claims than their more expensive colleagues.
The Bureaucratic Cheats
The corruption here is down to the root. The IRS admits to a 50% error rate in its own advice to tax-payers, suggesting inescapably that if the 2 + 2 = 4 type questions are disregarded, the real error rate approaches 100%, a conclusion completely consistent with the Money Magazine tests. Even using the 50% figure, it is inescapable that, however well-meaning they might be, any IRS employee answering any question at all is lying, unless they add to their answer the qualifier: "Of course, there’s a fifty per cent chance that my answer is wrong!" This sounds comical, but the implications could be as serious as losing the roof over your head and the bread off your table for anyone who looks to these folks for answers.
Think for a moment about the rank cynicism, arrogance, and depravity necessary to impose or even threaten sanctions against someone over their compliance with a law, the details of which baffle even its own full time administrators. To do so is to pretend to be serving the public interest, while actually perpetuating a fraud through which you collect your weekly pay. To do so is to cheat.
It may be that extraordinary virtue would be required for a person to give up a relatively cushy position as a government employee over an honest admission that since they can’t understand their responsibilities, they cannot perform them and shouldn’t be paid for doing so, and thus a lot to expect. But it is unconscionable that such a flounderer should presume to oversee the behavior and performance of anyone else regarding the same subject.
Here is what Shirley Peterson, who has held office as both head of the IRS Tax Crimes Division at the Department of Justice and Commissioner of the IRS, said in 1993: "...Eight decades of amendments and accretions to the Code have produced a virtually impenetrable maze. The rules are unintelligible to most citizens - including those who hold advanced degrees and including many who specialize in tax law. The rules are equally mysterious to many government employees who are charged with administering and enforcing the law." Ms. Peterson makes the tax code sound less like a law than a scheme, doesn't she?
Those who participate in this bureaucratic shake-down are the epitome of Hannah Arendt’s banal perpetrators of evil. They sullenly shuffle their papers, act in accordance with the scheme’s script when dealing with the marks and sputter with indignation at those who inconveniently refuse to play along.
They consume their attention with the insignificant details of their positions so as to have no time for the big picture, lest they be obliged to resign in disgust. Like all bureaucrats everywhere, they offer up the Nuremberg defense if pressed: "Hey, I don’t make policy, I just impose it on you (and collect my check)!"
Cheating on taxes certainly is a big problem, and it deserves the special attention it gets once a year. Frankly, the subject deserves special attention a lot more often than that. Let’s just be sure that when we’re bringing all that special attention to bear we’ve got the right targets in the crosshairs.
© Peter E. Hendrickson 2001