Cracking The Tax Code (PDF)
"Vertical" Inequality. Although equality under the law is a bedrock
American principle, the income tax treats citizens unequally. "Vertical"
inequality is created by hugely different tax burdens on citizens at
different income levels. Besides violating the spirit of equal protection guarantees of the
Constitution, such unequal burdens distort perceptions about the costs
and benefits of government because programs appear to be free of cost to
many.
"Horizontal" Inequality. Even people with similar incomes are treated
unequally by the many exemptions, deductions, credits, and other
intricacies of the income tax. For example, there are 59 income tax
provisions that vary depending on marital status. Likewise, the tax
differences between homeowners and renters with the same incomes can be
thousands of dollars because of itemized deductions for property taxes
and mortgage interest.
Complexity, Ambiguity, and Uncertainty. The current IRS
commissioner concedes that the income tax has become too complex for
accurate administration, which is evident in the 28 percent IRS error
rate on phone inquiries and 60 percent error rate on audits. Business
tax rules are so ambiguous that many disputes drag on for years and are
valued in the hundreds of millions of dollars.
Huge Size and Instability of Tax Law. Tax laws, regulations, and related
documentation span 45,662 pages. There were 441 changes to tax rules
in last year's tax-cut law alone. Pension tax laws have been substantially changed nearly every
year since the early 1980s, creating regulatory backlogs and leaving
employers unsure about how to comply.
Denial of Due Process. The IRS engages in many summary judgments, and
enforces them prior to any judicial determinations. Moreover, the very
complexity and ambiguity of the income tax seems to violate due process.
In 1926, the Supreme Court noted that a statute that is "so vague that
men of common intelligence must necessarily guess at its meaning and
differ as to its application, violates that first essential of due
process of law."
Shifting of the Burden of Proof. For non-criminal tax cases -- the vast
majority of cases -- the tax code reverses the centuries-old common law
principle that the burden of proof rests with the accuser. Except in
some narrow circumstances, the IRS does not have to prove the
correctness of its determinations. When the IRS makes erroneous
assessments, as it often does, citizens carry the burden to prove that
they are wrong.
Unreasonable Searches and Seizures. The
IRS's summons authority under tax code section 7602 allows it to obtain
records of every description from any person without showing probable
cause and without a court order.
Forced Self-Incrimination. The requirement to file tax returns sworn to
under penalty of perjury operates to invalidate the Fifth Amendment
protection against self-incrimination. Citizens face a legal dilemma. On
the one hand, refusing to file a return would expose a citizen to
prosecution for failure to file. On the other hand, disclosing
information sought in tax returns constitutes a waiver of Fifth
Amendment protections. The IRS can and does release that information to
federal, state, and local agencies for both tax and non-tax law
enforcement purposes.
