The IRS in Real-Time

Guess what? The IRS wants to be much more involved in your life. In fact, they want to be involved in your life in “real time.” Isn’t that good news?

Back in August, the IRS held another hearing on what they call the “Real-Time Tax System,” which they claim is intended to give the IRS the ability to identify tax non-compliance in real time.Of course, the Real-Time Tax System will require even more information from taxpayers, employers, banks and brokerage firms, and will require that information to be submitted by everyone on much shorter deadlines, but of course it’s all being done to “reduce the burden for taxpayers.” 

Of course it is. There’s actually a fairly insidious plan behind all of this. The “Real-Time Tax System” is just an appetizer for the pièce de résistance of the revenue establishment--a “return-free” system where the IRS would calculate your tax obligation for you (convenience!) and simply ask for your signature in large, friendly letters. In one fell swoop the IRS could claim to have the taxpayer’s best interests at heart, while making the calculation that reflects the best interests of the revenue establishment. 

Make no mistake--Not only will the return-free system result in your paying higher taxes, it will require that substantially more of your personal financial information be disclosed to the IRS. 

Perhaps the most cynical thing about the return-free system is that it takes advantage of the most vulnerable taxpayers—those with below-average incomes and below-average tax sophistication. What will they do when they get a bill from the IRS in a threatening envelope filled with legalese and threats of penalties? They’ll sign and pay up. 

Our voluntary tax compliance system is a feature, not a bug. It’s a key indicator of self-government, one of the hallmarks of American freedom. The bug is our absurd tax code, which contains multiple and conflicting definitions of income, saddles the U.S. economy with an incredible compliance burden, and results in deadweight losses to the economy and to our global competitiveness. 

The fault lies at the feet of Congress for not overhauling our tax code into something that is functional and competitive in the 21st century.

Congress should invest its time in fixing the tax code, instead of in finding ways to insinuate the IRS further into the lives of a supposedly free people.