|In a 1998 congressional hearing, Rep. William
Roth, R-Del., specifically said, "It is wrong to use these
kinds of aggressive tactics…"
The IRS got the message, shifted agents from enforcement to
service, put more effort into answering telephones and helping
taxpayers understand the confusing tax code.
This year, when a Syracuse University study team, Transactional
Records Access Clearinghouse, analyzed the IRS data, it found tax
enforcement had suffered.
"They're doing a lot, lot less than they were doing last
year, the year before last, 10 years ago," says David Burnham
of TRAC. "Audits are profoundly down."
In 1989, the IRS audited one of every nine taxpayers who earned
$100,000. But last year, it audited only one of every 204.
In 1992, the IRS took 2,519 taxpayers to court, but last year
it filed just 641 cases.
In 1992, the IRS audited just over half of the largest
corporations, but last year it audited just under a third.
On top of that, the IRS commissioner, Charles Rossotti, says
the new budget gives his agency a little more money but still not
enough to pursue tax cheats and protesters as vigorously as they
did in years past. "We need to do better," explains
Rossotti. "We can't continue the kind of decline we've had
over the last 10 years. We need to turn it around."
Losing Revenue, Losing
By reducing its effort to catch tax cheats, the IRS could be
opening itself up to more cheating and an enormous loss of
revenue, says Charles Lewis, the co-author of a new book, The
Cheating of America.
"The government is not collecting all the revenue that it
ought to be collecting," says Lewis. "And by its own
estimates — the IRS commissioner's own estimates — it's $195
billion a year. Well, that works out to $2 trillion over 10 years,
which is bigger than the Bush tax cut. Or, put it differently,
that is $1,600 that every taxpayer pays more in taxes because
we're not collecting all the taxes from all Americans."
Lewis and other critics fear taxpayers will cheat on a massive
scale if the IRS lowers its guard.
One way to gauge the effort is how the IRS treats tax
protesters who don't pay taxes as a matter of principle.
"It's unconstitutional," explains Nick Jesson, an
owner of an electronics company who refuses to pay taxes.
"There is nothing in the Constitution that allows them to
collect taxes from the American citizen wages."
Under the old IRS, Jesson and his company would have been taken
to court almost immediately. Now, the IRS does not even call.
When asked if Marc Rich were to file his first tax return this
year, what would be the chance he'd be prosecuted, Lewis answered,
"Almost no chance."
"This is an emasculation of an agency's ability to collect
taxes," says Lewis.
Blaming Congress' Original
So who's at fault? A former commissioner, Donald Alexander,
blames Congress: "Congress mandated the IRS come down lighter
on taxpayers. And, indeed, [the] IRS has done just that."
One reason may be that IRS employees fear they will be sued.
Congress inserted Section 1203 in the tax code to permit taxpayers
to strike back, specifically saying IRS subjects are subject to
dismissal if they act improperly.
But, Alexander says, "'acting improperly' is defined so
broadly that agents [who] particularly [have] collection
responsibilities are simply afraid to do anything."
In Congress' initial effort to remedy the situation in 1998,
Alexander thinks they really hurt the IRS. "Congress
instructed [the] IRS to be friendlier, more helpful, to be warm
and cuddly," he says. "Now, I see no reason why [the]
IRS shouldn't be friendlier to taxpayers, I think it ought to be
helpful to taxpayers, it out to be respectful of taxpayers, but
some people don't pay their taxes and won't pay their taxes unless
the IRS makes them do so."
The IRS insists Americans are still basically honest, but it
has no way of knowing for sure. And they have no way of finding
out because Congress cancelled the random sampling program the IRS
used to see whether people were paying their taxes. And with
10,000 fewer employees than a decade ago, there's no way now to
figure it out.