IRS turns its attention to cheaters

WASHINGTON — The number of Americans who believe it’s OK to cheat "a little here and there" on their taxes has risen 50 percent in the past four years, a government survey says — a trend that new IRS Commissioner Mark Everson promises to reverse by going after scofflaws at all income levels.

"That can’t continue," Everson said. "If that trajectory is allowed to continue, you won’t be able to fund the government, and you’ll have serious erosion of the basic rule of law."

The increase was detected in this year’s survey of taxpayer attitudes conducted annually for the IRS Oversight Board. The survey concluded that Americans’ commitment to paying taxes appears to be softening.

Of the 1,024 taxpayers surveyed in July, 12 percent responded that it was acceptable to cheat a little when filing income taxes. Only 8 percent felt that way in the same survey for 1999.

An additional group who said taxpayers should cheat "as much as possible" also went up, from 3 percent to 5 percent.

The percentage of people who agreed with the statement that it was every American’s civic duty to pay his fair share of taxes decreased from 81 percent in 1999 to 68 percent in 2003.

The telephone survey was conducted by RoperASW.

Everson, now six months into a five-year term at the head of the Internal Revenue Service, described the findings as a check engine warning light coming on after his agency spent the past five years poaching from the ranks of tax enforcers to improve customer service.

The number of agents and criminal investigators at the IRS has now stabilized after falling about 30 percent between 1996 and 2002, he said. With the decrease, enforcement also declined, even as the economy was creating new wealth and professional standards were eroding in some corners of the accounting and legal professions.

"There’s a belief that big corporations somehow are getting away with something, and so why should I be a good loyal taxpayer?" said Doug Shackelford, professor of taxation at the University of North Carolina at Chapel Hill.

Taxpayers also may be absorbing a political message from lawmakers arguing for tax cuts, Shackelford said. "Some of the story underlying ‘Your taxes are too high’ is that they’re stealing from you, so I’m justified by stealing back. I’m only making the wrong right," Shackelford said.

Everson said he sees a potential danger of eroding tax compliance at all income levels, though the agency’s most visible enforcement actions have been against corporations and wealthy individuals promoting and using abusive tax shelters.

At the top of the income scale, tax shelter promoters peddle potentially abusive products not just in the United States, but increasingly abroad, both to American subsidiaries and foreign companies, he said.

Among the lowest income brackets, Everson sees challenges in educating new immigrants to a system of taxation that requires people to step forward and voluntarily assess and pay their taxes. In the middle, he points to the softening attitudes among ordinary Americans.

The solution, he said, is a more visible role for IRS enforcers.

"You have to have the occasional trooper in a vehicle under a bridge that everybody sees … pulling somebody over," he said.