IPI Report Says IRS Biggest Violator Of Financial Privacy

by Mike Godfrey, Tax-News.com, Washington

29 April 2002

In a new Institute for Policy Innovation (IPI) study entitled 'Tax Reform: The Key to Preserving Privacy and Competition in a Global Economy', senior Heritage Foundation fellow, Daniel Mitchell has called for fundamental tax reforms in order to redress the financial privacy balance in the United States.

In the report, which forms part of the IPI's 'Roadmap to Tax Reform' series, Mr Mitchell points out that although American citizens are among the keenest exponents of the need for, and benefits of, financial privacy, the US tax code means that the Internal Revenue Service is one of the greatest privacy offenders, intruding into almost every aspect of taxpayers' financial affairs.

'The bias in our tax system against income that is saved and invested causes a loss of financial privacy. The IRS - because of the pervasive double taxation of capital income - needs to know all the gory details of our financial dealings,' he explained.

The IPI study reveals that the taxes which create the most intrusion for US taxpayers are taxes on interest income, taxes on dividends, estate taxes, and capital gains taxes.

However, Mr Mitchell announced that: 'The good news is that fundamental tax reform would restore financial privacy since savings and investment income no longer would be double-taxed.'

The report calls upon Congress to urgently address this issue, and to replace the currently intrusive US tax code with a less-invasive alternative. 'It is the only way to truly redress this invasion of privacy,' the Heritage Foundation senior fellow concluded.

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