In a town increasingly seduced by the quick fix or the simple answer, tax amnesty is made to order. It's quick to implement, easy to understand -- and wrong.
No one I know is discussing tax amnesty as a move toward tax equity or good tax policy. It is being discussed now because some see it as an easy way to achieve additional revenue without calling it a tax increase. They think they can avoid a fight with the president over the definition of a tax increase.
As a former state tax administrator, I see two things fundamentally wrong with the proposal for a federal tax amnesty program. First, it would weaken confidence in our tax system for the overwhelming majority of Americans who honestly and conscientiously report and pay their income taxes each and every year. Second, I don't believe it would result in any significant new revenue for the federal government.
The state tax amnesty programs were launched from a platform of weak enforcement, a promise of amnesty and a threat of beefed-up enforcement in the future. This carrot-and-stick approach did, in some instances, provide an incentive for tax evaders to come forward to pay up. But it is important to point out that state income taxes are only a fraction of the federal in- come tax burden and, therefore, much more easily repaid during an amnesty period. For these reasons, I don't think the state experience is a model with which to predict a successful federal program. I don't believe a federal tax amnesty program would result in any significant new revenue to the federal government. Those who want to make certain that our income tax system yields revenues that this country needs and expects ought to join some of us in Congress who have been pleading for restoration of enforcement funds for the Internal Revenue Service, so it can properly enforce our tax laws. In recent years, under President Reagan's lead, there has been a serious decrease in funding for tax law enforcement at the Internal Revenue Service. The number of tax returns audited by the IRS has suffered an alarming decrease. The number of IRS agents working on accounts receivable and compliance has decreased. This simply doesn't make sense. It is even more illogical to follow a decrease in tax law enforcement with the offer of tax amnesty.
Until recent years, our tax system had been the marvel of the world. It relied on the voluntary cooperation of the millions of Americans who on April 15 were willing to meet their responsibilities as citizens. In recent years, the president and Congress have nearly ruined the tax system by using it as a cash register for social and economic engineering: an incentive here, a loophole there. The fairness of the system has been eroding at the very same time that enforcement funds have been cut.
Now as we wrestle with tax reform to make the system more fair, some in Congress propose that those citizens who have fulfilled their tax obligations should understand and accept a program that rewards those citizens who didn't. That's a quick and certain way to further erode the taxpayers' confidence in a system that is already in trouble with the folks back home.
But in these days of quick answers and gain with no pain, tax amnesty is made to order for the administration and this Congress. It overpromises in the short run and ignores the damage it would do in the long run.
It's time for all of us to do the right thing the right way. We need to make our tax system more fair, beef up enforcement and raise sufficient revenues to pay for that which government spends. I know it doesn't have as much sex appeal or pizzaz as some marginal progress -- such as tax amnesty -- that some claim would manufacture money, but this approach would really work. It could be the first step toward a habit of doing the right thing.