September 22, 2003 | Commentary on Taxes
The IRS Vs. The Bill Of Rights
To get an idea of what it's like to tangle with the IRS, imagine
having to fight Mike Tyson -- with both hands tied behind your
The IRS is the most feared government agency, and with good reason.
Americans who run afoul of this bureaucratic behemoth have little
chance of surviving unscathed.
In large part, this is because the rules are rigged against
taxpayers. We have to provide information to the IRS, even though
the Bill of Rights supposedly protects us from self-incrimination.
We're guilty until we prove ourselves innocent, even though our
Constitution -- at least, in theory -- guarantees the presumption
And heaven forbid you scribble a little message in the margins of
your tax return: The IRS has the power to fine you for exercising
your right to free speech.
Yet even with the playing field tilted in its favor, the IRS wants
more power. Because some taxpayers have had the unmitigated gall to
challenge this Darth Vader-like bureaucracy, the IRS is targeting
More specifically, the agency has filed summonses against a number
of law firms, accounting firms and other professional tax advisers
demanding that they reveal confidential information about their
clients. Why? Because the IRS suspects their clients are seeking to
exploit "loopholes" in order to lower their tax bills. And even
though tax avoidance is not against the law, IRS officials want to
use these firms as deputy tax collectors.
In football terms, they want to eavesdrop on the other team's
huddle so they know what play will be called -- ignoring fiduciary,
legal and ethical responsibilities those various firms owe to their
The IRS conveniently sidesteps the legal and confidentiality
issues in the cases. Instead, the bureaucrats piously declare that
they need to ransack files because some taxpayers may have obtained
professional advice on how best to lower their tax bills. They
claim their fishing expedition is part of a campaign to stamp out
"abusive" tax shelters.
If the agency really wanted to eliminate tax shelters, though, the
commissioner and other high-level IRS officials would be
proclaiming the self-evident virtues of a flat tax. But don't hold
your breath waiting for this to happen. After all, there would be
no need for 100,000 bureaucrats at the IRS if lawmakers replaced
the internal revenue code with a simple and fair flat tax -- one
that normal people could understand.
Fortunately, there are growing signs that Congress may realize tax
reform is the only answer to IRS abuses. Earlier this year, the
Senate voted overwhelmingly to endorse the principles of the flat
tax. This vote wasn't binding, but it was nonetheless encouraging
to see that every Republican and nearly two-fifths of Democrats
agreed, at least in principle, that the current tax system should
be replaced. Lawmakers even understand that the flat tax is the
best way to encourage compliance. "As tax loopholes are eliminated
and the tax code is simplified, there will be far less opportunity
for tax avoidance and fraud," their resolution states.
In other words, there are two ways to improve enforcement of tax
laws. One is to keep the current tax code -- a 17,000-page
monstrosity that even tax lawyers have trouble understanding -- and
rip up the Constitution so the IRS has more power over our lives.
The other is to rip up the tax code and replace it with a flat tax
that eliminates social engineering and government micro-management
of our lives.
Ironically, some of our former Cold War adversaries have learned
the right lessons. Lithuania, Estonia and Latvia adopted flat taxes
after the collapse of the Soviet Union. Russia followed suit about
three years ago with a 13 percent flat tax. These flat-tax systems
have been so successful that Ukraine just adopted a flat tax, and
Slovakia, Rumania and Belarus also are considering one.
President Reagan and other leaders used to condemn the Soviet Union
because the communist system ran roughshod over individual rights.
Today, former communist nations have the flat tax, while the IRS is
trying to undermine lawyer-client confidentiality, one of our most
important historic legal protections. It makes you wonder who
really won the Cold War.
is the McKenna Fellow in political economy
at The Heritage Foundation (heritage.org), a Washington-based
public policy research institute.
Distributed nationally on the Knight-Ridder Tribune wire