Official Government Reports Yeild Few Nuggets

Today, some highlights from the just-released IRS Oversight Board Annual Report. It’s remarkably redundant. There’s really not much here that hasn’t been said before by other overseers.

First thing to catch my eye was the claim that “Taxpayers increasingly recognize that the IRS provides good quality service.” Delving into the details shows how this was determined:

Well in excess of 80 percent of respondents in nearly all service channels rated their satisfaction with IRS service as better than, or the same as, other government agencies.

Now that’s setting the bar! Imagine the guffaws in the corporate boardroom if someone came in saying “our surveys show that more than 80% of our customers say that our customer service is at least as good as that of the government bureaucracies they interact with!”

The Board makes six recommendations for closing the “tax gap”. Five of these are the sort of boilerplate that I’ve seen in these sorts of reports before (simplify the tax code, enable the government to more closely monitor a larger variety of financial transactions, improve “customer service”, do more research into the nature of the tax gap, reach out to professional tax practitioners), but number six is new and has a delicious irony to it, at least from the perspective of this conscientious tax resister:

[T]here must be more emphasis on personal integrity in making tax decisions. The Board has found that the vast majority of taxpayers state that their personal integrity is a very important factor in influencing their tax compliance. In our survey, 82 percent of taxpayers cite personal integrity as the principal factor for reporting and paying their taxes honestly. Our tax administration system should challenge taxpayers and preparers to be conscious of the need for integrity when making tax decisions, and maintain the highest standards of compliance.

The Government Accountability Office released its own report on the tax gap , and the Senate Budget Committee held a hearing on the topic. Both of these, along with the Oversight Board report, use a study to estimate the size and extent of this gap — one that relied on decades-old data and guesstimates in parts.

And that doesn’t even count esoteric things like taxes on virtual goods and currencies, such as those obtained in on-line role playing games. To the extent that these have real-world value (and they do — check eBay), their acquisition (even their virtual acquisition) is taxable income. The IRS could try to enforce this tax under current law, but it doesn’t know where to begin and would rather ignore the whole issue and hope it goes away. Is this part of the “tax gap” between what the law allows the government to steal and what it actually stuffs in its loot bag? That’s just one example of the sort of thing the study didn’t even attempt to measure.

Truth is, nobody knows how big the gap is today or how it is composed.

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