Tax Cheating Is About to Rise

The IRS knows it, the American people know it, and now the Washington Post exposes it so that it is very clearly articulated.  Catherine Rampell, an opinion writer for the Washington Post spells it out in this article.  I brought facts to light on this topic in November 2014 when I wrote the book, The Wheels are Falling Off the Wagon at the IRS.  Since then things have not gotten better.  In fact they have gotten worse.  The IRS Large Business and International (LB&I) division of the IRS is having manager meetings all month at 17 locations around the country to discuss how this division that audits taxpayers with assets more than $10 million is going to change going forward.  The division is having meetings like this for the first time in over six years, because the problems are so significant and the division needs to restructure itself.  The division is going to focus on a series of campaigns on certain tax issues going forward.  What will this mean for voluntary compliance remains to be seen.  By focusing on certain areas and not others there is concern about voluntary compliance in the “not others” area in the future.  Those involved with tax planning will probe the systems and soon likely address those “not others” areas causing an additional drop in compliance going forward. 

Should our congressional leaders and President care?   After all the current federal tax system is expected to bring in $3.3 trillion in 2016.  That is a trillion with a “T”.   To maintain the current system is one alternative.  It is clear that the current system as implemented by Congress and enforced by the IRS cannot keep up and is underfunded by design of the current Congress.  The agency is doing the best it can under the circumstances, but I am concerned that once the American people lose faith in the system it will be very hard to put the jennie back in the bottle.

Another alternative is to dismantle the current system and to create a new one.  If that alternative is promoted it is going to take careful thought and planning. We need to be careful not to throw out the baby with the bath water for those thinking of creating a new system.  Think about it. We are talking about a system that currently collects $3,300,000,000,000.  That is a lot of zeros.  The current system has a lot of problems.  Simplification would be nice, but lobbyists have a lot of concerns.  What is a loophole for one group is a necessity for another.  For example should we drop the home mortgage deduction and negatively impact the housing industry.  These questions require some careful analysis.  Simplified systems such as a value added tax, a fair tax, or similar system to state solutions if proposed need very careful analysis. I was charged with this task in 90s and Congress decided to stay with the existing system once Congress determined the impacts of other systems and their ramifications.

I am very concerned for our country on several levels and the IRS is only one of those concerns. More importantly I am concerned about conflict in America and civil discourse in our society as a whole and with our politicians that reflect our society.  63% of Americans believe civility is a major problem. 71% believe civility has deteriorated significantly in the past few years.  Blame does not solve problems, but focusing on the problem does. 

My most recent book, Peaceful Resolutions: A 60-step illustrated guide to the art of conflict resolution is in proof copy and addresses overcoming conflict.  It should be available next month.   As we watch daily negative commentary by our presidential candidates and their surrogates is this really what we want for America?  Is this not the country founded on ideas and ideals?  Don’t we need to really focus on the problems and concerns of the American people?   I would argue that our leaders need to refocus and stop the bickering with each other.  Without a common enemy we have become divisive and fragmented.   We have reduced ourselves to sound bites, tweets and gross simplifications.  Real world problems are complex and require careful consideration to develop an approach that is in the best interests of the American people.  

What is happening at the IRS is indicative of what is happening to our country.  We are underfunding and attacking an agency that is doing its best to carry out the laws and policies of the American people based on the decisions of Congress on the laws passed by Congress as well as the funding of the agency charged with enforcing those laws.  We get what we deserve.   If we aren’t careful, we may just see a collapse in an American system built on voluntary compliance and equal enforcement.  Without that the funding, our system of government as we know it is in jeopardy. Without funding of our system of government the entire system as we know it is in jeopardy.

Give serious thought to this article by Catherine Rampell.  Consider the ramifications going forward.  This is not an issue that is going to grab at your heart strings and swell us with emotion to jump in and address it.  However, it is a very serious issue relating to our wellbeing as a republic.  If we don’t demand our politicians to do what they were elected to do and that is to govern and work with each other to improve the lives for everyday Americans, then we have no one to blame but ourselves.  Electing politicians that believe in party over country only hurt us as Americans. We need to elect politicians that want to listen to the other side, develop a common ground and come to solutions that are workable.

We are at a crossroads.  Will we turn towards conflict resolution, de-escalate the situation, listen to each other, have conversations and discussions leading to negotiations and collaboration, or will we focus on pettiness, sound bites, tweets and personal attacks that will divide and allow our enemies to make significant inroads going forward.   Our enemies want us to fight with each other.  We are at a crucial time.   My book, Peaceful Resolutions provides a process to address conflict resolution.  I might suggest our politicians need to read this book and consider what they intend to do to work together to address our nation’s problems.  Parties are not more important than country.  Country is more important thatn party affiliation.  We need to remember that.