On Tax Day, politicians and mainstream media will hector Americans to be grateful for the opportunity to pay their taxes. The Internal Revenue Service website touts a moth-eaten quote from a dead Supreme Court Justice: “Taxes are what we pay for civilized society.” But recent history is the best antidote to groveling in gratitude to the federal agency that commandeers a lion’s share of your income.
The smiley face IRS should have been banished forever after revelations in the years before the 9/11 attacks.
Former IRS district chief David Patnoe observed in 1998, “More tax is collected by fear and intimidation than by the law. People are afraid of the IRS.” In 1996, an IRS instructor in the Arkansas-Oklahoma district was caught on videotape lecturing collection agents on how to treat taxpayers:
“Make them cry. We don’t give points around here for being good scouts. The word is enforced. If that’s not tattooed on your forehead, or somewhere else, then you need to get it. Enforcement. Seizure and sales. That’s our mind set…If you’ve got an assessment, enforce collection until they come to their knees.”
One confidential IRS document uncovered in 1997 revealed that IRS auditors in the San Francisco region were expected to assess at least $1,012 in additional taxes for each hour they spend auditing a taxpayer’s return. IRS revenue officers ignored regulations and guidelines before seizing property. In one case in the Arkansas-Oklahoma region, the only effort an IRS agent made before confiscating two cars “consisted of driving to the taxpayer’s house, honking his car horn, and noting that no one came out of the house in response,” according to an IRS audit.
IRS agents have been indoctrinated to see taxpayers as a class enemy. This attitude is epitomized by “Culture Bingo,” a game used to train IRS agents and auditors. The American Institute of Certified Public Accountants complained that Culture Bingo and other “economic reality training modules” encouraged examiners to think the worst of taxpayers. Culture Bingo sought to help employees recognize “an IRS organizational culture regarding the audit process.” The game encouraged IRS agents to recognize or practice the following:
- “I use summons to get third party records.”
- “Fraud referrals help an examiner get promoted.”
- “Taxpayers can skim $20,000 and we’ll never find it.”
- “Most taxpayers deposit unreported receipts in their bank accounts.”
After an IRS agent got enough other agents in the class to sign onto his “bingo” card, he shouted out “I’ve got culture!” and the class launched into a discussion of the reasons why these beliefs and practices were true and necessary. One of the most damning “lessons” of the training was the doctrine, “Taxpayers seem to live better than I do.” The American Institute of Certified Public Accountants said of the course materials, “Every ethical issue presented finds the ethical result to be pro-IRS and anti-taxpayer. There is not one scenario where an IRS agent might act unethically against a taxpayer’s interest.”
Culture Bingo was especially perilous to IRS targets because IRS auditors sometimes simply make up income—and then demand that the person pay additional taxes based on the IRS allegation. Bruce Strauss, a private tax preparer who worked for IRS collections for over thirty years, testified to Congress, “The IRS now has the authority to assign additional income to a taxpayer at its discretion, without any basis in fact.” Any IRS assertion about a person’s income—even if there is no evidence to support it—automatically receives a presumption of correctness in the Tax Court and in federal district courts. The IRS can impose crushing legal costs on someone merely by asserting that they owe an extra $10,000 in income—which the person then must fight and disprove in court.
The federal tax code creates far more pitfalls than Americans realize. During Mark McGwire’s rush to break Roger Maris’s major league home run record, a reporter asked an IRS spokesman what would happen if someone caught the baseball that broke the record and returned it, gratis, to McGwire. IRS spokesman Steven Pyrek announced that “the giver is responsible for paying any applicable tax on any large gift.” If the record-breaking baseball was valued at $1 million, the person who returned it to McGwire could face an IRS bill of $140,000 or more. After a hailstorm of criticism, the agency backed off its interpretation. However, if the case had been less publicized, the donor might well have been gouged.
President Joe Biden sought to expand the IRS budget and IRS power more than any American president in the preceding half-century. Biden sought a new army of IRS agents to hound Americans and corporations to pay far more taxes. The Washington Post reported that “the single biggest source of new revenue in the plan comes from dramatically expanding the clout of the nation’s tax agency.” Slate reported, “Biden wants to fund a massive upgrade to the American welfare state by making the IRS great at audits again.”
In 2022, Congress enacted the Inflation Reduction Act. This Biden-backed legislation boosted the agency’s budget by $80 billion over a decade and authorized hiring 87,000 new IRS agents and employees. “Only 4% of the additional funding will be devoted to improving taxpayer service, while 58% will go to escalating enforcement efforts,” the New York Post reported. Rep. Kevin Brady (R-TX) estimated that the law would result in more than a million new audits per year, including more than 700,000 targeting Americans earning less than $75,000 a year.
The Biden administration and its media allies were outraged at suggestions that vastly expanding the number of IRS agents could result in bad things happening to innocent people. Rep. Thomas Massie (R-KY) observed, “The IRS has never pointed a gun at a billionaire or his employees, so why does the IRS need 87,000 new agents, AR-15s, and 5 million rounds of ammunition? They’re not gunning for billionaires or their bank accounts.” Massie helped publicize a film clip of an IRS recruiting program showing Utah students putting on flak jackets and readying toy guns and handcuffs for a raid “taking down a landscape business owner who failed to properly report how he paid for his vehicles.” (“First they came for the tulip bulbs…”)
President Donald Trump is reportedly seeking to reduce by 50% the number of IRS employees. If that happens, The New York Times fretted, “Americans may have to wait longer to receive refunds or speak with I.R.S. employees in future filing seasons.” Some reductions in staffing have already occurred but it remains to be seen how much cutting will occur.
Regardless of the number of IRS employees, Americans remain in peril thanks to federal tax law, federal regulations, and endless court decisions entitling the IRS to sweeping deference. Unless Congress repeals a hefty stack of revenue laws and nullifies a shelf full of regulations, the IRS will continue to have far too many penalty flags to throw at hapless citizens.
