The Future of Tax Cheating

That man in the picture above is John Koskinen, the commissioner of one of the most hated governmental agencies in the United States: The Internal Revenue Service (IRS). Why? Well, first off, the US tax code is unnecessarily complex and esoteric, so the IRS – though they had absolutely nothing to do with the enactment of the tax code itself – naturally gets blamed for it, because the IRS is responsible for the enforcement of the tax regulations. To make things worse, the IRS is terribly inefficient when it comes to customer service. In fact, according to the Wall Street Journal, in 2015, the average wait time for the phone line was around 21 minutes. Now, I could go on and on about how much the American public hates the IRS, but I want to talk about what we need to do about it, to fix it.

No, I’m not talking about fixing the terrible customer service – though this may be something that should be addressed later on. What I’m talking about is something far more consequential and severe: tax cheating.

Tax cheating is a seemingly formidable problem in the United States. I’ve talked about international tax dodging in some of my past blogs – here and here. However, in contrast to many European nations, a seemingly unique problem in the United States is the lack of an efficient and strict enforcer of tax regulations. The IRS, you may ask? Nah. Not even close. A brilliant article by The Washington Post outlines the numerous problems that are linked to the increase in tax cheating in the United States, many of which are directly related to the inefficiencies and the bureaucratic problems within the IRS. Is it the fault of the IRS? As we will soon discover, it really isn’t.

Congress, who has been gradually cutting funds for the Internal Revenue Service, is the proponent of the IRS’s numerous problems from the awful phone lines to a lack of funding necessary to hunt down tax dodgers. According to said Washington Post Article titled “Please don’t tell anyone, but tax cheating is about to rise in the US,” due to the plethora of budget cuts by Congress in recent years, audit rates for large corporations have dipped along with the number of criminal tax prosecutions. In other words, the IRS no longer has enough monetary resources to catch as many tax criminals – many of whom are large businesses and corporations.

Furthermore, tax cheating seems to also be a social phenomenon. We always hear about tax havens and large corporations evading taxes. In 2008, we saw America’s largest financial institutions – CitiGroup, Bank of America, Merrill Lynch… sound familiar? – being bailed out by Congress for no apparent reason. The article contends that many Americans are thinking ‘Why do I have to be the one to pay the taxes?’ In addition, a declining trust in government, the article points out, is another major factor in the rise of tax dodging.

After reading the analysis by the Washington Post, I felt nothing other than sheer disappointment. The United States is, surprisingly, one of the most law-abiding countries when it comes to taxes: around 82 cents are paid for every tax dollar owed to the government. However, due to the overwhelming self-interest of a few individuals and firms, everyone is worse off – except for those who successfully dodge taxes, of course. It’s time Congress cracks down on these selfish firms and properly funds the IRS to enforce tax regulations. Without such reforms, only tax-abiding citizens, most of whom are middle class families, will continue to suffer.

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