Blame Tax Code, Not The IRS Says Reformer

by Mike Godfrey, Tax-News.com, Washington

23 May 2002

Writing this week for the news and current affairs portal National Review Online, Heritage Foundation Fellow and leading tax reform advocate, Daniel J. Mitchell comdemned the complexity of the US tax code.

Responding to a recent New York Times article, in which it was suggested that the Internal Revenue Service is biased in favour of wealthy citizens, and allows them to evade taxes almost unimpeded, Mr Mitchell argued that the complexity of the country's ever increasing body of tax legislation is the reason that this state of affairs has come to pass.

The NY Times has accused the tax authority of auditing many more low income taxpayers than rich ones, arguing that the chances of becoming the subject of an investigation into Earned Income Tax Credit (EITC) is around 1 in 47, compared to the 1 in 145 audits conducted on US citizens earning more than $100,000.

Although in his response, entitled 'Avoidance Therapy', Mr Mitchell agrees that this is indeed the case, he points to the complex tax avoidance provisions built into the US tax code as the reason for the comparatively low number of audits, arguing that the legality of the majoriy of the schemes utilised by the wealthy to minimise taxes means that auditing the rich is simply not cost-effective:

'It's not that the rich are less likely than the poor to scam the system,' he explained. 'But wealthy taxpayers aren't easy targets for the IRS. Armed with lawyers, accountants and financial planners, they have the resources to fight - and often win - a battle with the tax collector.'

Observing that: 'The IRS, meanwhile, is left with the unenviable task of trying to enforce one of the world's most complex tax codes,' Mr Mitchell suggests that the implementation of a flat income tax rate similar to that introduced in Russia could reduce both the incentive and the ability to evade taxes, and would equalise the treatment of rich and poor taxpayers.

'The results have been spectacular. Russia's flat tax has been in effect since January of last year, and inflation-adjusted tax revenues have jumped by nearly 30%,' he revealed.

Recommended