Cheating is growing

By ROBERT WHITCOMB
THE PROVIDENCE JOURNAL
Here's an irritating note for those who have been slaving away on their tax returns. If all taxpayers had paid what they owed, there would have been a 144 billion surplus in the last fiscal year rather than a 247 billion deficit.
But cheating is spreading, which means that law-abiding people (or at least those who try to be honest in facing the vast incomprehensibility of the tax code) are increasingly penalized to make up for the (usually richer) folk who dodge their taxes.
Much of this loss of tax revenue comes from under-reporting business income. Another big leak is under-reporting capital gains. Then there are such maneuvers as reporting personal expenses as business expenses.
Many of these evasions are done intentionally, but many are not. That's because of the jungle-like quality of the tax code, which is ever more difficult to understand. An honest person can easily make mistakes in trying to fill out his her return. And it's so complex that knaves can easily game it. These knaves are usually richer people, well armed with accountants and tax lawyers, who, truth be told, also often don't understand the code themselves -- for the simple reason that it makes no sense.
The best way to reduce tax cheating would be to simplify the whole code, eliminate special benefits for certain industries (such as real estate) and move to a flat tax. The flatter the tax, the easier to collect the money that's owed. And while some complain that a flat tax would be unfair to poorer people, in fact its simplicity, if it were coupled with some sort of system rebating money to poor people, would make it fairer than the current system, which rewards those with the resources to game the current labyrinthine "system."
Streamline the system
So why not focus on streamlining the tax system and toughening up the penalties for those who cheat in a cleaned-up system that, finally, most literate people could start to understand?
The problem is that the American political habit of using the tax "system" to manipulate virtually everything in America is deeply embedded in Congress, which, lest we forget, is the main source of the problem, and the White House. The dishonest use of the tax code (rather than direct government spending) to pay off favored groups, and to avoid a transparency in federal fiscal policy that might be embarrassing, leads to much tax cheating and undermines trust in government. Congress would prove that it's serious about tax equity if it moved in the direction of both tougher enforcement and simplicity. Maybe it could even avoid raising taxes if it did so.
Or maybe most taxpayers like the current arrangement because it lets them avoid knowing how much things really cost.
Scripps Howard News Service