Tax Cheating

Donald Morris

Description

Silver Winner, ForeWord Book of the Year in the Political Science Category
Finalist for the 2013 Eric Hoffer Book Awards presented by Hopewell Publications

From unreported gambling winnings and inflated claims of the value of clothing donated to charity to money hidden in Swiss bank accounts and high-profile tax schemes plotted by celebrities and business leaders, the range of tax cheating opportunities is wide and the boundaries and moral status can be hazy. Considering the behavior of individuals and small businesses as well as the involvement of congress and the IRS, Donald Morris combines insights from law, psychology, sociology, criminology, accounting, economics, and philosophy to examine the ethical issues surrounding tax cheating and implications for tax policy.
Acknowledgments

Preface

1. Tax Cheating—The Problem

Introduction
Tax Cheating
Tax Fairness
The Meaning of Cheating in Tax
Tax Fraud
Penalties and Deterrence
Cheating—Specific Characteristics

2. The Tax Gap, Tax Protestors, and Small Business

The Voluntary Tax System
The World of Tax Protestors
The Gaping Tax Gap
Small Business and the Tax Gap
The Broken Window of Opportunity

3. Tax Complexity

The Complexity Problem
Is Complexity to Blame?
The Moral Dilemma
Nonvoluntary Taxation
Complexity and Morals
Is There Ever a Time for Draconian Measures?

4. The Moral Duty to Obey the Law

Morality and Legality
Ethical Relativism and Absolutism
The Role of Morality in the Law
Moral Obedience to the Law
The Ethics of Tax Evasion
Justifying a Moral Duty

5. Cheating, Competition, and Fairness

Cheating and Competition
Hand-to-Hand Combat
Fairness and Equality
Getting What You Pay For
What If Everyone Cheated?
The Uneven Playing Field

6. Unintentional Cheating

A Fork in the Road
Fair Share Argument
Unintended Cheating
The Meaning of Cheating in Football
Blaming the Messenger

7. The Courts, Equity, and Taxes Due

Taxes and Equity
Rules and Principles
The Innocent Spouse Rules
The Courts and Equity
Equity, Subjectivity, and Negligence
The Bankrupt Taxpayer
Interpreting the Law—Transparency

8. Compliance, Complexity, Conscience, and Fairness

The Moral Dimension of Tax Compliance
The Matthew Effect
Our Vision of a Fair Share
The Moral Quality of Actions
Enlisting Conscience in Reducing Tax Cheating
Conscientious Objectors
Civil Disobedience

Notes
Selected Bibliography Excluding Public Documents

Sujets

• Maison
• Finances domestiques
• Personal finance
• Central
• National

Informations

• Publié par: State University of New York Press
• Date de parution: 30 mai 2012
• Nombre de lectures: 0
• EAN13: 9781438442723
• Langue: English

Extrait

Tax Cheating
Illegal–But Is It Immoral ?
Donald Morris

Published by State University of New York Press, Albany
© 2012 State University of New York All rights reserved Printed in the United States of America
No part of this book may be used or reproduced in any manner whatsoever without written permission. No part of this book may be stored in a retrieval system or transmitted in any form or by any means including electronic, electrostatic, magnetic tape, mechanical, photocopying, recording, or otherwise without the prior permission in writing of the publisher.
For information, contact State University of New York Press, Albany, NY www.sunypress.edu
Excelsior Editions is an imprint of State University of New York Press
Production by Ryan Morris Marketing by Fran Keneston
Library of Congress Cataloging-in-Publication Data
Morris, Donald, 1945–
Tax cheating : illegal—but is it immoral? / Donald Morris.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-4384-4270-9 (pbk. : alk. paper) — ISBN 978-1-4384-4271-6 (hbk. : alk. paper) 1. Tax evasion—Moral and ethical aspects—United States. 2. Income tax—Moral and ethical aspects—United States. 3. Taxation—Moral and ethical aspects—United States. I. Title. HJ4653.E75M67 2012172'.1—dc23
2011031099
10 9 8 7 6 5 4 3 2 1

[W]hat more is necessary to make us a happy and a prosperous people?—A wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.
—Thomas Jefferson (Inaugural Address, March 4, 1801)
PREFACE
The goal of writing about the ethical dimensions of tax cheating grew out of my reaction to a public opinion poll I read in 1999. According to the poll, 87 percent of Americans believe that tax cheating is always wrong. That level of agreement among Americans led me to wonder what forces were at work—was it a high level of patriotism, a belief that the government employs its scarce resources wisely, or an acknowledgment of the value of the tangible and intangible benefits we receive in return for our tax dollars? I wondered how such a distasteful process as filling out a tax return and writing a check to the treasury could possibly strike such a powerful moral chord in that many people.
After ruminating on the question for a number of years, puzzling about where to begin to look for an answer, it occurred to me that there is simply a lot of confusion about taxes and about the origins of moral duties. Perhaps, I realized, I could attempt a clarification and exploration of the question that 87 percent of my fellow citizens apparently agree on—but with which I do not—to see where it led. In so doing I would need to define cheating in general and tax cheating in particular. I would also need to address the difference between a general moral obligation to obey the law versus a specific moral duty to pay the exact amount of income tax determined to be a person's share by the elaborate machinations of the Internal Revenue Code.
Tax evasion has been the subject of research in law, criminology, accounting, psychology, and economics for many years. It is a crime with well-defined characteristics. More than one writer has addressed the ethics of tax evasion, some defending occasions when evading taxes is the morally proper thing to do. Unlike tax evasion, however, tax cheating is largely undefined and has been all but ignored by researchers. When mention is made of tax cheating in the literature or by politicians or the news media, it is either assumed that its meaning is commonly known and needs no explanation, or that it has the same meaning as tax evasion. The definition of tax cheating developed here, however, is considerably broader and more complex than the relatively well-defined concept of tax evasion. I argue that what constitutes tax cheating is every bit as complex as the tax laws being cheated.
Clarifying what activities are encompassed by tax cheating requires looking at the income tax system as a whole and evaluating the respective roles played by taxpayers, the IRS, the Internal Revenue Code, Congress, the courts, the economic and political ideologies that influence congressional thinking, and those who are paid to influence the legislative process. Understanding the moral quality of tax cheating requires an understanding of the contribution each of these elements makes to the system. A first step in addressing the problems of our current Tax Code involves understanding that the moral quality of cheating is determined by the moral quality of the rules being cheated. To the extent the current Code lacks any moral foundation, cheating its rules—while certainly illegal—cannot be immoral. To adequately comprehend the meaning of tax cheating in this way, it is necessary to evaluate the moral quality of our income tax system employing insights from law, economics, accounting, psychology, criminology, sociology, and philosophy.
After several years of seemingly unproductive reading and thinking about tax cheating, during the summer of 2007 I finally began to manipulate the parts of the answer I was looking for, gradually finding a place for each within the puzzle. During the next three years I arranged and rearranged the pieces to form a reasonably coherent argument about the lack of a moral foundation for paying income taxes under the current system. In so doing I concluded that it is not complexity itself that results in the Code's lack of moral grounding, but unharnessed complexity beholden to no guiding principle or moral intuition; the parts of the Code have simply metastasized.
Since the 1930s there have been complaints in Congress that the Tax Code is too complex. But even if it were somehow possible to simplify the current Tax Code—getting back to the constitutional mandate to raise revenue for defense and the general welfare—continuing to ignore the systemic problems (most notably the self-assessment model) that encourage and enable tax cheating, would mean that we had come no closer to producing a Code that allowed us to judge for ourselves what share of the tax burden we are paying and, also—just as important—whether it is our fair share.
ACKNOWLEDGMENTS
I would like to express appreciation to my brother Jim for his encouragement in the initial stages of this project as well as his assistance at the end in reading and commenting on certain topics treated in the book. His knack for recognizing an idea's potential for resonating with the public has been honed through his many years in advertising. My lifelong friend and fellow CPA Tim Bogan was kind enough to read early drafts of a number of chapters, providing valuable feedback. His perspective as a practitioner of both tax and common sense gave me encouragement that I was on the right track.
In the spring of 2010 the University of Illinois Springfield reduced my teaching load to allow additional time for me to complete this project, which I began to formulate in 2000; for that much-needed time I would like to thank my dean Ron McNeil and my department chair Leonard Branson. The outside reviewers for SUNY Press provided helpful suggestions and comments for which I am grateful and which improved the final product. Andrew Kenyon of SUNY Press has also been most helpful in guiding the manuscript through the necessary processes while offering encouragement along the way. Also from SUNY Press, I want to thank Alan V. Hewat for his editorial assistance and Ryan Morris for her production expertise.
I received invaluable editorial assistance from Katherine McCracken, whose eye for detail is truly amazing. Her wide-ranging knowledge and vast experience saved me from many an embarrassing mistake. I cannot thank her enough. The clerks in the Supreme Court libraries both in Santa Fe, New Mexico, and Springfield, Illinois, were of great help in locating a number of the legal materials cited in the book. My teaching colleague at the UIS Center for Teaching and Learning, Brian Jackson, read a number of chapters and offered insightful comments and suggestions. In spite of the excellence of my editorial help, there will remain errors in this book, and these are of my own making. I anticipate that some of these errors are the result of my treading into certain subject areas—especially economics, law, psychology, criminology, and sociology—where my knowledge and experience are only those of an interested outsider. I gladly accepted the risk of these errors in exchange for the opportunity to pursue an interdisciplinary study of tax cheating.
In their responses to my requests for feedback, a number of public officials, mostly U.S. Senators and Congressmen, as well as the Internal Revenue Service Oversight Board and employees of the U.S. Justice Department engaged in the Tax Defier Initiative, were instructive. Jen E. Ihlo, National Director of the Tax Defier Initiative, upon receiving portions of this manuscript for comment, informed me that the “Tax Division's mission is to enforce the nation's tax laws fully, fairly, and consistently, through both criminal and civil litigation, in order to promote compliance with the tax laws and maintain confidence in the integrity of the tax system.” The Division's mission, she explained, “does not include reviewing books or other similar materials.” I found this response disappointing for two reasons. First, in my letter I had not asked for a book review but rather for Ihlo's professional opinion on whether a book such as this crossed the line and qualified me as a Tax Defier (something I was hoping to avoid). Second, it was disappointing because the specific focus of this book includes exploring reasons for (1) problems with the enforcement of the nation's tax laws, fully, fairly, and consistently; (2) problems with compliance with the tax laws; and, most of all, (3) prob