Yesterday I watched the Meet The Press interview of Rep. Rangel who is the new Chairman of the House Ways and Means Committee. I have always been a fan of his because he is a straight shooter and rarely gives a BS answer. As the head of tax policy in the House, I found that one of his statements about tax policy concerned me.
I am in total agreement with his idea about increasing the tax rates for the upper 1% of taxpayers to eliminate the Alternative Minimum Tax for the middle class. But, Rangel suggested that the IRS use greater enforcement action to collect delinquent taxes. The majority of delinquent taxes are owed by those who have experienced financial difficulties primarily from unforeseen health care issues and business failures. The upper 1-10% of Americans are paying less taxes now and are not usually delinquent in payment for obvious reasons. Accordingly, the brunt of the IRS collection activity will fall again upon the dwindling middle class who have unforeseen financial problems. And the IRS administration of collection matters has been historically unfair.
The one positive thing that the Republicans did while they were in power was to reduce the power of the IRS. Having worked for that agency, I know first hand that giving them more power is the last thing you want to do. There is a major difference between good and fair tax policy achieved by legislation and enforcement powers given to the IRS. Most people are unaware that the majority of the taxes collected in the U.S. are from enforced employee withholding. The IRS collection and audit process accounts for a very small percentage of our tax revenues. For the most part, the IRS should function only as an administrative agency to collect the taxes that are automatically withheld and to process the voluminous tax forms for corporations and individuals.
One of my favorite books about the IRS was: A Law Unto Itself; Power, Politics and The IRS by David Burnham published in 1989. The book was well researched and an accurate picture of the horrors that can be created by a too powerfull IRS. Democrats in power have a tendency to give the IRS too much power because of the perception of the loopholes that only the rich are capable of using. The fact is that the rich will always find the loopholes and the poor financially burdened Americans cannot afford the high priced tax attorneys and accountants.
A few years ago the Republican Congress backed by many Democrats revised the Bankruptcy Act to the detriment of the same group that would bear the collection burden of a more empowered IRS. May I suggest to Chairman Rangel and the Democrats that they direct their legislative power to good tax policy and legislation to make our tax system a good progressive tax system, which should be the standard for western civilization. The ideas of the right wing to move the tax system to a flat tax is terribly regressive and is not in the best interest of the dwindling middle class. In doing that, the Democrats must not give the IRS an unintended power that gives the rich an even further advantage over the less fortunate.