The Crisis in Tax Administration

by Aaron, Henry; Slemrod, Joel

• ISBN13: 9780815701231
• ISBN10: 0815701233
• Format: Paperback
• Copyright: 2004-05-20
• Publisher: Brookings Institution Press

Summary

People pay taxes for two reasons. On the positive side, most people recognize, even if grudgingly, that payment of tax is a duty of citizenship. On the negative side, they know that the law requires payment, that evasion is a crime, and that willful failure to pay taxes is punishable by fines or imprisonment. The practical questions for tax administration are how to strengthen each of these motives to comply with the law. How much should be spent on enforcement and how should enforcement be organized to promote these objectives and achieve the best results per dollar spent?Over the last few years, the U.S. Congress has restricted spending on tax administration, forcing the Internal Revenue Service to curtail enforcement activities, at the same time, that the number of individual filers has increased, tax rules have become more complex, and more business have become multinational operations. But if too many cases of tax evasion go undetected and unpunished, those who may have grudgingly paid their taxes may soon find it easier to join the scofflaws. These events in combination have created a genuine crisis in tax administration.The chapters in this volume evaluate the capacity of authorities to enforce the tax laws in a modern, global economy and examine the implications of failing to do so. Specific aspects of tax law, including tax shelters, issues relating to small businesses, tax software, role of tax preparers, and the objectives of tax simplification are examined in detail.The volume also builds a conceptual basis for future scholarship, with regard not only to tax administration, but also to such fundamental questions as whether taxpayers respond mostly to economic incentives or are influenced by their experiences with the filing process and what is the proper framework for evaluating the allocation of resources within the IRS.

Author Biography

Donald C. Alexander, Akin, Gump, Strauss, Hauer and Feld Joseph Bankman, Stanford Law School Marsha Blumenthal, University of St. Thomas Leonard E. Burman, Urban Institute Charles Christian, Arizona State University Frank Cowell, London School of Economics William G. Gale, Brookings Institution William M. Gentry, Columbia University David Glickman, Baker and McKenzie Gerald H. Goldberg, California Franchise Tax Board Austan Goolsbee, University of Chicago Stuart Hamilton, Organization for Economic Cooperation and Development Morton A. Harris, Hatcher, Stubbs, Land, Hollis and Rothschild James R. Hines Jr., University of Michigan Peggy A. Hite, Indiana University Business School Janet Holtzblatt, Department of the Treasury David Cay Johnston, New York Times Mark J. Mazur, Internal Revenue Service Janet McCubbin, Department of the Treasury Nina Olson, Internal Revenue Service Jeffrey Owens, Organization for Economic Cooperation and Development Gerald W. Padwe, American Institute of CPAs Alan H. Plumley, Internal Revenue Service Jeffrey Rohaly, Urban Institute Deborah H. Schenk, New York University School of Law John T. Scholz, Florida State University Douglas Shackelford, University of North Carolina Stephen E. Shay, Ropes and Gray C. Eugene Steuerle, Urban Institute David R. Tillinghast, Baker and McKenzie Joop N. van Lunteren, Tax and Customs Administration, The Netherlands David Weisbach, University of Chicago Law School James W. Wetzler, Deloitte and Touche Henry J. Aaron is senior fellow in the Economic Studies program at the Brookings Institution, where he also holds the Bruce and Virginia MacLaury Chair in Economics Joel Slemrod is Paul W. McCracken Collegiate Professor of Business Economics and Public Policy and professor of economics at the University of Michigan, where he is also the director of the Office of Tax Policy Research

Table of Contents

Preface	vii
1 Introduction	1	(8)
Henry J. Aaron and Joel Slemrod
2 The Tax Shelter Battle	9	(29)
Joseph Bankman
Comments by David Cay Johnston and David A. Weisbach	28	(10)
3 Issues of International Tax Enforcement	38	(31)
David R. Tillinghast
Comments by James R. Hines Jr. and Stephen E. Shay	57	(12)
4 Small Business and the Tax System	69	(55)
Joel Slemrod
Comments by William M. Gentry and Morton A. Harris	101	(23)
5 The TurboTax Revolution: Can Technology Solve Tax Complexity?	124	(24)
Austan Goolsbee
Comments by Gerald H. Goldberg and Mark J. Mazur	138	(10)
6 Issues Affecting Low-Income Filers	148	(53)
Janet Holtzblatt and Janet McCubbin
Comments by Leonard E. Burman and Nina Olson	188	(13)
7 Tax Preparers	201	(29)
Marsha Blumenthal and Charles Christian
Comments by Peggy A. Hite and Gerald W. Padwe	218	(12)
8 Carrots and Sticks in Enforcement	230	(46)
Frank Cowell
Comments by John T. Scholz and Douglas A. Shackelford	258	(18)
9 Effects of Tax Simplification Options: A Quantitative Analysis	276	(35)
William G. Gale and Jeffrey Rohaly
Comments by David Glickman and Deborah H. Schenk	299	(12)
10 Ultimate Objectives for the IRS: Balancing Revenue and Service	311	(36)
Alan H. Plumley and C. Eugene Steuerle
Comments by Donald C. Alexander and James W. Wetzler	338	(9)
11 Experience and Innovations in Other Countries	347	(42)
Jeffrey Owens and Stuart Hamilton
Comments by Victoria Perry and Joop N. van Lunteren	380	(9)
Contributors	389	(2)
Index	391