February 17, 2010 - Phil Hodgen

The Geithner effect and offshore bank account enforcement

Go to the TaxProf Blog for a quick summary of the IRS Oversight Board‘s latest report on taxpayer attitudes.

Among the statistics highlighted by Paul Caron:

  • How much, if any, do you think is an acceptable amount to cheat on your income taxes? A little here and there, 9% (highest in 6 years).
  • How much influence does each of the following factors have on whether you report and pay your taxes honestly — Fear of an audit? Great deal of influence, 39% (all-time high).

These are important because this is where people are reporting on their own attitudes and behavior. Assuming that people tell the truth on surveys (rarely an accurate assumption), I see these as two interesting data points. Translated into English, I would say the message is:

People fear the IRS more, yet are willing to cheat more.

More fear (not respect in the integrity and fairness of the system, but rather fear of a system perceived to lack fairness and integrity) causes more willingness to cheat.

I’m viewing this through the lens of watching the IRS throw anvils at people for failure to file Form TD F 90-22.1 — the threat of penalties is astronomically disproportionate to the amount of unreported income. I know that people are deliberately choosing noncompliance precisely because threatened penalties are ambiguous in their application and vastly dwarf the actual tax liability involved.

“Keep doing what you’re doing, and you’ll keep getting what you’re getting.” This is my unsolicited advice to our trusted public servants at 1111 Constitution Avenue (pretty picture courtesy of Wikipedia).

Unsolicited advice to people sitting out there with tax problems? Deal with them. An old guy I knew long ago would say “Things just get worser and worser and worser.” (He would say this about a different problem in a different context). The point? Clean up your messes.

Voluntary Disclosure