Posted on 07/17/2002 7:21:20 AM PDT by wcdukenfield
We knew the Internal Revenue Services tax-collection arsenal included, among other things, the legal right to audit, sue and penalize tax cheats. But until last week we didnt know the agency had license to gratuitously humiliate innocent taxpayers in the process.
On Friday, the Journal reported on page one that the IRS has disclosed the names of hundreds of citizens engaged in what amounts to tax planning. These individualsmany of them prominent businessmenare accused of no wrongdoing. Their only sin is that they are clients of KPMG, the accounting firm currently doing battle in court with the IRS.
Last week the Justice Department sued KPMG on behalf of the IRS. The government alleged that some of KPMGs tax shelters are illegal and requested the names of clients who had inquired about them. The accounting firm complied, providing the names in a so-called privilege log to protect their identities. The IRS promptly went public with the names, blithely smearing the reputations of innocent third-party individuals in an effort to strong-arm its court opponent and embarrass its clients.
This is a dangerous and outrageous precedent. To begin with, not all tax shelters are illegal, and a court has to rule on the ones in question. Nor is it against the law to minimize ones tax burden. In fact its common sense, and private citizens shouldnt be smeared in government press releases or news leaks for trying.
But the real potential damage here is to the assumption of privacy among taxpayers. Our tax system works because people are willing to disclose highly confidential information regarding investments, charitable contributions, estate planning and so on. That willingness is linked inextricably with an understanding that these disclosures will be kept secret. Keeping, this confidence encourages compliance. Abusing it in the manner of the IRSs KPMG disclosures can only have the opposite effect. This is unprecedented and its fundamentally wrong, says Kathryn Keneally, a tax expert at the American Bar Association.
Section 6103 of the tax code is the basic provision that protects the privacy of tax returns. And in the past, the IRS has interpreted 6103 as broadly inclusive and sweeping in nature. When groups like the Landmark Legal Foundation and even Members of Congress have sought the identities of tax-exempt organizations or audit targets, the IRS has argued that it was duty-bound to protect taxpayer identities.
But protecting privacy apparently is no longer a concern when the IRS is a plaintiff. These days, the agency would have us believe that publicly shaming a targets clients is fair game in establishing a case against the target.
Tax experts are debating whether the IRS disclosures are in fact illegal, but Donald Alexander, a former IRS commissioner, says it doesnt matter. Even if releasing these names is permissible under law, its still inadvisable, says Mr. Alexander. You do not release names of individuals to the public unless theres an overwhelming reason to do so, and I find that reason lacking here.
The IRS has also left itself naked to charges of political partisanship. Justices lead litigator on this matter is Stuart Gibson, a well-known Democratic activist in Virginia. Among the names disclosed last week was William Simon Jr., a Republican who happens to be in the middle of a gubernatorial race in California. Mr. Simons opponent, Democrat Governor Gray Davis, immediately pounced on the disclosure. A major Bush campaign contributor and a recently appointed U.S. ambassador also were sideswiped. Respecting the confidentiality of tax returns is a good way to avoid the appearance of political bias.
Not long ago, Congress was curtailing IRS abuses. Perhaps post-Enron, the tax man feels as if he can once again get away with anything, even harassing honest Americans. The agency falls under the purview of Treasury Secretary Paul ONeill and clearly needs adult supervision. He might start by firing or sending to Siberia whoever was responsible for this abuse of government power.
Scrap the code! If we didn't have such a bloody mess of a tax code, we wouldn't need these stupid tax shelters. Sheesh...
The IRS has so much power and zero accountability.
It should be clear to all that either we end the IRS or the IRS ends us.
There are bills in Congress right now that would end the IRS. Take a look at a national sales tax (click on SALES TAX on the left of the black bar). Eliminate the IRS AND eliminate income taxes, payroll taxes, and withholding.
Have you looked at what a national sales tax would do to alleviate this type of abuse?
Or risk going to jail.
Alright. Everyone who is surprized by this raise their hands.
Boonie Rat
MACV SOCOM, PhuBai/Hue '
But if we didn't have such a convoluted tax code they could never intimidate and fleece so many taxpayers or pay for the expansion of government. You just really don't get it, do ya'? ;-)
FMCDH
Give the Office of Homeland Security a few years, and you will think the IRS is your best friend.
Hear, hear. Oh, to dream though. At a minimum, W should get some p*ssed off patriot cowboy types in to play hardball with the "maggots". At least make their life hell...
The only person I know to ever be seriously audited by the IRS happened to have cheated them out of about $2 million in taxes. They repossesed his gorgeous home in Darien, he lost his prized country club memberships, his wife died, and he committed suicide. Its sad, but frankly the guy deserved it.
This is what it is all about pure and simple. Everyone in California who opposes Davis, should join a class action civil rights action against Gibson for misusing his authority to interfere in a political contest.
What disinformation, but no shock or surprise coming from a mainstream publication like the WSJ.
The government tells you in the 1040 instruction booklet in the "Privacy Act and Paper Reduction Act Notice" that any and all information you disclose on a tax return can be used against you. It is worded in such a way that the general public doesn't realize it is are being Mirandized.
Maybe this is part of an overplay of the democrats hand that could create change. Any politician who enjoys the rewards of creative accounting(even if it is legal) without loudly demanding real change deserves to just go straight to hell.
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