Page Created:
        November 26, 2017
Last updated:
        November 26, 2017

Why Are Taxes So Complex?

by Jay Starkman, CPA

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In this article, Jay points out the difficulties that impede the passage of tax simplification legislation.

Copyright 2017 Jay Starkman
All rights reserved.

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Congress has recently held many hearings focusing on reforming the tax code. On July 18, 2017 the Senate Finance Committee held a hearing titled, “Hearing on Comprehensive Tax Reform: Prospects and Challenges.” Testifying were former assistant secretaries for tax policy Jonathan Talisman, Pamela Olson, Eric Solomon, and Mark Mazur in a showing that Congress is anxious to revise the Internal Revenue Code to make it fairer, simpler, and more efficient and to foster American growth and competitiveness. The House Ways and Means Committee Tax Policy Subcommittee held a “Hearing on How Tax Reform Will Simplify Our Broken Tax Code and Help Individuals and Families” on July 19, featuring former Chair Bill Archer.

Tax complexity erodes voluntary compliance and reduces revenue by making the tax laws difficult to understand and, thus, to comply with. Ultimately, taxpayers lose respect for the tax system itself. They create abusive tax shelters, trying to benefit from gray and incomprehensible tax provisions.

Simplification allows taxpayers and their advisers to understand and comply with the relevant tax laws and enables the IRS to administer those laws more easily. Simplifying taxes requires rough justice because there will be winners and losers.

What Causes Tax Complexity?

Tax provisions may be classified as “structural” or as “tax expenditures.” Structural provisions are those necessary to implement a tax on net income. Underlying transactions that are extraordinarily complex require a complex tax law. However, a complex tax law can still be logical and coherently structured. Here, simplification means controlling complexity. Using the services of the legislative counsel’s office can significantly improve tax code language, resulting in more readable and understandable provisions with greater certainty about how courts will interpret the statute.

Tax expenditures are tax subsidies or financial incentives that constitute the biggest cause of complexity in our income tax system because they are unnecessary for implementing a tax on net income. Few tax expenditures help the nation as a whole.

There is no vocal and effective constituency for tax simplification. It requires champions in Congress and the administration. There will be faint praise for promoting tax simplification — only potential risks to legislators for promoting some unpopular changes needed to achieve simplification. Lobbyists greet any efforts at simplification through restriction of an existing tax expenditure with a well-financed campaign portraying social or economic upheaval if their client’s particular tax subsidy is curtailed. Each new tax expenditure is equally hailed as the solution the country has been waiting for.

Home mortgage interest, state tax and charitable deductions, individual retirement accounts, the standard deduction, and child credits are examples of tax expenditures with broad constituencies. Accelerated depreciation, oil and gas depletion, parsonage exclusion, low-income housing, and energy credits have narrower but powerful constituencies.

There is nothing inherently wrong with tax expenditures if a complete cost-benefit analysis determines that each is the most efficient method for a necessary government intervention in the economy. No such analysis is being performed, resulting in many inefficient tax expenditures.

There is a built-in bias toward tax expenditures. Non-taxwriting committees can further their mission (for example, ensuring better housing or employment) by proposing or supporting tax expenditures. The taxwriting committees gain new constituencies made up of those affected by these programs. A Finance Committee member interested in climate change, for example, can gain a political foothold in this area without being a member of the Environment and Public Works Committee.

Complexity and the Budget Process

If a government agency cannot obtain an appropriation for a comparable program in its own budget, it will almost inevitably favor a tax expenditure – any tax expenditure – as an extension of its own direct programs. Unlike spending programs, tax expenditures are immune from automatic spending cuts. They can skirt the Byrd rule by front-loading expenditures while backloading revenue and expiring in 10 years. Everyone wins by not requiring a trade-off among tax expenditures, direct expenditures, and realistic budgeting — except the nation as a whole.

This all began with the Congressional Budget Act of 1974, which governs procedures by which Congress annually adopts a budget through a reconciliation resolution that cannot be filibustered. One result has been to transfer power from taxwriting committees to budget committees, which set revenue targets. That forced tax committees to focus on the budget, often in conflict with simple and coherent tax policy.

Beginning in 1980, instructions to the taxwriting committees mandated a $4 billion one-year revenue increase. Subsequent legislation mandated three-year revenue yields. 1 Later, it turned to five years. In five-year budgets, it was too easy to backload revenue losses, delaying serious losses beyond year five. Today, it’s a 10-year budget projection. 2

In the current political climate, taxes cannot be raised explicitly. This has contributed to complexity because lawmakers resort to base broadeners, stricter compliance, and user fees — which means closing loopholes, restricting tax expenditures, requiring more information reporting, collecting taxes faster, and imposing higher penalties. These are called “cats and dogs” because they raise little revenue when considered singly, but together all these complex provisions raise a great deal of revenue needed to meet the budget targets. This has resulted in penalties so numerous (and some, so Draconian) that no one can count them all, up from just six in the original IRC of 1954.

Cats and dogs are popular because few are affected by penalties, excise taxes, and highly targeted base broadeners. Targeted taxpayers find them frustrating and quite hard to challenge.

Finding dozens of highly targeted cats and dogs takes time. No time remains to consider simpler alternatives to the complexity of the resulting tax bill. That results in a tax increase that is complex but politically acceptable. Because of the budget deficit, decisions are based more on the amount of revenue to be derived than on coherent tax policy. Legislators believe that fine-tuning provisions for revenue requires regulation-type statutory language, as if each sub-subsection could be costed out.

For example, the code contains at least 19 tax incentives to encourage college attendance. 3 It also contains one disincentive — that full-time students aged 19-23 will be taxed the same as minors under age 19 – at their parents’ marginal tax rate – included as a revenue offset in 2007. This is prime simplification territory.

The 1986 Tax Reform Act

The 1986 Tax Reform Act lowered rates and broadened the tax base, providing a roadmap on how to pass a major tax overhaul without much simplification. It introduced complex passive loss, 4 section 263A inventory capitalization, unworkable section 89 employee benefits, kiddie tax, onerous foreign income reporting, and many other provisions that vastly complicated tax compliance in an effort to close loopholes while remaining revenue-neutral. The biggest simplification, taxing capital gains at ordinary income rates, was soon repealed, and an exemption to passive losses for real estate professionals was added. Although it met the required five-year target of revenue neutrality, year six (1992) was projected to lose $21 billion, much the result of transition rules.5

In the 1986 deliberations, then-Finance Committee Chair Bob Packwood explained the need to shield legislators from lobbyists, the press, and the public to make progress:

    When we’re in the Sunshine, as soon as we vote, every trade association in the country gets out their mailgrams and their phone calls in 12 hours and complains about the members’ votes. But when we’re in the back room, the Senators can vote their conscience. They vote for what they think is good for the country. Then they can go out to the lobbyists and say: “God, I fought for you. I did everything I could. But Packwood just wouldn’t give in.”6

There were unsavory deals that had to be made for the measure to pass, especially with “the oilies.” Packwood still fumed over it at a 2015 Senate hearing. In the 1986 TRA, he retained $1.4 billion of depletion benefits in order to pass a restriction on IRAs, which added $24 billion in revenue needed as an offset for other reforms 7 :

    Well, on the Senate floor, this IRA amendment came up, and I won it 51-48, and 19 out of the 20 oily Senators voted with me. And had I not made that deal, I would have lost a couple of them. And had I lost a couple, I would have lost on the IRAs and lost the bill. 8

Tax Simplification for the Majority

Except for the recordkeeping burden, the public is shielded from most tax complexity. When they encounter a complex tax situation, they hire an adviser. Thus, tax complexity means only, “How much does it cost to prepare my return?” and “How big is my refund?”

The most recent IRS statistics reveal that in 2014, 73 percent of tax returns filed with the IRS yielded just 11 percent of individual tax revenue. That’s 108.3 million of the 148.6 million returns processed. Those 73 percent include all single people grossing up to about $47,000 annually and all married couples earning up to about $94,000. It means that an inordinate amount of resources is devoted to collecting $148.4 billion of tax. The remaining 27 percent of tax filers yield $1.2 trillion, 89 percent of all income tax. The IRS expends scarce resources on lower-income taxpayers because fraud within this group, abetted by tax complexity and e-filing, may exceed the annual IRS budget.

Finance Committee Chair Orrin G. Hatch, R-Utah, began the July 18 hearing by declaring, “American families, individuals, and businesses collectively spend hundreds of billions of dollars a year – not to mention countless hours – simply trying to comply with the tax code.” There may be a solution.

Sen. Elizabeth Warren (D-Mass) has introduced S. 912, the Tax Filing Simplification Act of 2017. It would require the IRS to establish and operate the following programs free of charge:

  • offering online tax preparation and filing software;

  • allowing taxpayers to download third-party-provided return information relating to individual income tax returns; and

  • allowing individuals with simple tax situations to elect to have the IRS prepare their returns.

The presence of Obamacare’s excess advance premium tax credit repayment and individual responsibility penalty could make S. 912 difficult to implement. Still, serious consideration should be given to Warren’s proposal, which could dramatically simplify taxes and even eliminate tax return preparation costs. 9 The IRS already has all this information. At a minimum, S. 912 would be a great milker bill. Intuit spent $1.25 million on lobbyists and gave $2.12 million to 120 California politicians from 2005 to 2010 to narrowly defeat the popular California pilot project, ReadyReturn, from launching statewide.10

Consumption Taxes

I was disappointed that Sen. Johnny Isakson (R-GA) made a fleeting appearance at the July 18 hearing to discuss the insidiously named FairTax. This is a discredited 2003 proposal by former Rep. John Linder, R-Ga., which claims that a 30 percent national sales tax could replace income, payroll, estate, and gift taxes. 11 The rate would be have to be even higher if food, medicine, government purchases, and other exclusions were applied. Combined with up to a 10 percent state sales tax, a 40 percent consumption tax would incentivize black markets and depress economic activity. And there would still be state income tax, up to 12 percent. National sales tax proposals to allow states exclusive dominion were resoundingly defeated in 1932 and 1942 because they are regressive.

Some claim we have placed ourselves at a great disadvantage by relying on income taxes without a VAT. Most countries use some form of consumption tax, often called a VAT or goods and services tax. VAT countries can be divided into three groups, based on the reason that each adopted a VAT:

  • European Union. VAT is a requirement for membership in the EU, and it has been adopted by EU candidates.

  • Developing nations. Countries with immature or evasion-ridden tax systems have adopted a VAT because it’s relatively easy to establish and administer. South Korea, for example, adopted a VAT in 1976 because its existing tax system couldn’t adequately police other forms of taxation.

  • Other. Some countries use a VAT to fund social programs (Australia), to maintain fiscal stability (Canada and Japan), or to offer incentives to relocate foreign export businesses (China).

Those who complain that our corporate income tax rate is the highest among all OECD nations fail to acknowledge that those countries impose a VAT, or worse, suggest this as a reason we need a VAT. The overall U.S. tax burden, absent a VAT, is lower than that of other OECD nations. One of the biggest dangers of any national consumption tax, acknowledged at the hearing, is that it’s so easy to raise the rate, as shown by the low rates at which VAT and state sales taxes began and how high they are today.

Renowned former Ways and Means Chair Wilbur D. Mills explained that Europe adopted VAT as a substitute trade barrier to compensate for the revenue loss from tariff reductions caused by liberalized trade with the United States:

    We didn’t say anything, publicly, at least, about the fact that the European Common Market adopted such a system. They did it to offset the concessions, which they had given, in a trade agreement to us in the way of reduction of duties. We didn’t say anything about it, even though the Value Added-Tax did make it more difficult for us to export into the European Common Market. 12

VAT rebated by other nations as a border adjustment does place the U.S. at a competitive disadvantage. For political reasons, the Supreme Court did not considered this an illegal bounty that requires Treasury to levy a countervailing duty equal to the amount that had been rebated. A U.S. border adjustment tax might alleviate this disadvantage, and there is precedent for imposing it. 13 With $2.2 trillion of goods imported in 2016, 14 a 5 percent revenue tariff to offset VAT rebates could theoretically raise $110 billion annually with tax administration that is simpler than any other consumption tax. Or, with $1.46 trillion of exports, a 15 percent border adjustment tax on the $740 billion import-export gap might also raise $110 billion.

Stanley S. Surrey, an assistant treasury secretary in the 1960s who coined the concept “tax expenditures,” opposed a VAT as “just a general retail sales tax collected in a different way.” He wrote that adopting a national sales tax would make the U.S. federal tax system “distinctly worse.” Regarding international trade, he argued that a national sales tax would not bring any advantages to the United States. Finally, he argued, “If a national sales tax were ever deemed desirable in the United States, it should take the form of a retail sales tax and not a value-added tax.” 15

Our corporate income tax may be the highest among the OECD countries, but our zero VAT is the lowest. That’s one reason foreigners flock to our shores — to purchase products exported from their own countries tariff-free and VAT-free, cheaper than at home. A prior generation called it “dumping.” 16

Implementing a 15 Percent Business Tax

It is naive to assume that lowering tax rates will make corporations more amenable to paying income tax. The modern accounting profession received a major boost from the Revenue Act of 1909, which imposed a 1 percent tax on corporations. A frenzy of tax planning followed to avoid that minor levy. Large corporations today maintain tax departments, not as mere administrative centers, but as profit centers. They are expected to find or devise methods to minimize taxes. Sen. Bill Cassidy (R-LA) appreciated this when he commented, “Some of these high-tech companies have very low effective tax rates. . . . How much lower can you get than zero?” (Answer: Refundable credits.)

Citizens for Tax Justice regularly publicizes how more than a quarter of the Fortune 500 companies paid an effective federal income tax rate of less than 15 percent over an eight-year period. It claims that more than 73 percent of Fortune 500 companies maintain subsidiaries in offshore tax havens. Collectively, multinationals reported keeping $2.5 trillion offshore (just 30 companies account for 66 percent of this total), awaiting the day of cheap repatriation or tax holiday. After tax breaks and deductions, Citizens for Tax Justice noted, corporations pay an average effective rate of 18.5 percent rather than the 35 percent statutory rate. The Congressional Budget Office reported that in fiscal 2011, corporations paid income tax of just 12.1 percent on profits earned from activities within the United States. 17

M. Carr Ferguson, former chair of the American Bar Association Section of Taxation, recommended transparency in publicizing the authorship and intent of tax provisions, elimination of loopholes, and terser provisions of broader application, which might justify a revenue-neutral tax rate as low as 15 to 20 percent. He suggested that “corporate tax revenues might actually increase” if only we would trust the commissioner and the courts to interpret and apply the provisions sensibly. 18

Serious concerns have been expressed over how to implement President Trump’s proposal to lower the business tax rate to 15 percent without setting off an avalanche of tax avoidance. Suggestions to restrict the low rate to capital and exclude service income would be subjective and complex. A less complex and subjective method would be to tax at the individual tax rate any funds distributed from a passthrough entity. Only undistributed funds retained in the business would be taxed at 15 percent. That way, the 15 percent tax becomes a tax deferral, available as capital to expand business, without creating an unfair advantage over wage earners. It’s not too different from the “previously taxed income” category for S corporations before the Subchapter S Reform Act of 1982. It’s a complexity this author does not like but probably the best way to avoid abuse of a preferential rate while fulfilling the goal of employing capital in a business.

The OECD base erosion and profit-shifting project is a desperate effort to prevent unintended tax avoidance on intellectual property. Establishing domicile for IP in a tax haven is one way high-tech companies pay such low income tax rates. Any shift by the United States to a territorial tax will have to consider a version of BEPS.

Funding the IRS

Admitting that Congress underfunds the IRS, Sen. Thomas R. Carper (D-DE) was impressed by former assistant secretary for tax policy Mark Mazur’s comment at the July 18 Finance Committee hearing: “Underfunding the IRS is like underfunding your accounts receivable department. No rational business would do that.” So why has Congress authorized private tax collectors to collect outstanding tax debts instead of collecting them in-house?

According to Commissioner Mark Everson (2002-2007), the IRS could collect the tax for less, but increasing the IRS budget counts against the 10-year revenue projection, while hiring outside contractors does not. 19

Federal attempts at private tax collection in 1872, 1996, and 2006 were dismal failures. New Jersey’s attempt ended in a 2005 scandal. Richmond, Virginia, also failed. A congressional investigation following the 1872 fiasco concluded, “Any system of farming the collection of any portion of the revenue of the Government is fundamentally wrong,” and concluded that only the Bureau of Internal Revenue should collect taxes. 20 The 2006-2009 attempt collected $98.2 million, costing $16.5 million in commissions and $30.7 million for IRS program costs, for a net $51 million, if you ignore $55.4 million start-up costs at the IRS; otherwise, it was a $4.4 million loss. 21 Only 22 percent of the accounts farmed out were resolved as fully paid, mostly from smaller balances owed. The new 2017 private tax collectors are reportedly off to a scandalous start. 22

Another former assistant secretary for tax policy, Jonathan Talisman, complained in testimony that administering healthcare reform was burdened on the IRS without funding. One must appreciate how resourceful the IRS became in creative funding. The fee list that the IRS publishes for issuing private letter rulings near the beginning of each year is supposed to be calculated in accordance with OMB Circular No. A-25. The first revenue procedure of each year lists most fees. For 2017, fees ranged from $2,400 to $28,300 (up nearly 400 percent since 2011). The 2015 National Taxpayer Advocate Annual Report labeled these fee increases “Most Serious Problem No. 2.” The IRS simply raised user fees to pay for implementing Obamacare, which Congress wouldn’t fund. It’s a violation of Circular A-25 rules on how fees are supposed to be set.

Failure to properly fund the IRS causes compliance problems. Except for IT, the IRS has had a hiring freeze for six years. Employee count is now below 78,000 (down from 94,000 in 2011), as its budget declined to $11.7 billion from $12.4 billion. 23 Only 3,000 employees are under age 30, creating a challenge to find the next generation of IRS managers and executives. There are 5,500 fewer revenue agents, revenue officers, and criminal investigators, resulting in an audit rate of just 0.5 percent, down from 1.2 percent. 24 The 2016 National Taxpayer Advocate Annual Report complained about the IRS’s “grossly outdated technology and infrastructure.” Yet the IRS must address calls for improved customer service by deferring computer upgrades.

The administration’s 2018 proposed budget calls for a further reduction of $260 million next year, which may eliminate another 3,000 employees. When taxpayers find “the tax code too complicated or they can’t get through to the IRS to get a simple question answered, they are less likely to comply.” 25 Simplifying taxes, requiring fewer returns and less complexity is a cost-effective solution to improve compliance.

Complexity and budget cuts have resulted in such “efficiencies” as centralized campus audits out of Utah with no single examiner assigned to the case, resulting in no continuity. 26 More onerous is the “Appeals Judicial Approach and Culture” project, which restricts access to appeals in non-docketed cases. I recently docketed a case in Tax Court and instead of hearing from Appeals or district counsel, the examining agent who handled the audit called, demanding that I return to resolve this with her! Lack of funding drives compliance complexity and frustration for everyone.


In few hearings is there ever a mention of former Ways and Means Committee Chair Dave Camp’s 2014 tax reform proposal, which resulted from a three-year study proposing to vastly simplify the income tax while broadening the base. It contains something for everyone to hate, yet it is a coherent and comprehensive proposal for study and consideration in any income tax reform. Other proposals are either broad bare outlines or specific action lists.

Perhaps the biggest obstacle to tax reform is the gridlock and distrust that pervades Washington. Hatch declared, “For six years now, I have been beating the drum on tax reform.” He lamented Democratic preconditions for tax reform, especially the demand “that Republicans abandon the use of budget reconciliation for tax reform. . . . The only thing we’d accomplish by foreclosing the use of reconciliation would be to ensure that the minority would be able to more easily block any bill from passing.” 27 I’m hopeful because at that and similar hearings, Democrats have expressed as strong a desire for tax reform as Republicans.

World War II Treasury Counsel Randolph Paul was the architect of our modern income tax system, founder of the eminent law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, and a coauthor of Merten’s Law of Federal Income Taxation. He had timeless advice regarding tax reform:

The task of building a sound tax system will be hard and long. It is not a partisan job; it is not a task that will be completed by any one Congress. There will always be things left to do, if we have the wisdom to benefit by the new insight which experience can bring to open minds, and if our tax system is to fit the changing economic and social needs of each succeeding generation....The final compromise of all conflicting forces will be a tax system intelligently designed to make a continuously prosperous America. 28


1 Charles E. McLure Jr., “The Budget Process and Tax Simplification/Complication,” 45 Tax L. Rev. 25 (1989); Proceedings of The Invitational Conference on Reduction of Income Tax Complexity, Washington (Tax Management Institute), at I-A-5 (Jan. 11-12, 1990).

2 There was a time when we mocked such unrealistic budgeting: “A Russian! I love Russians! Comrade, I’ve been fascinated by your five-year plan for the last 15 years.” Melvin Douglas courting Greta Garbo in Ninotchka (1939).

3 Eighteen are listed in Joint Committee on Taxation, “Background and Present Law Related to Tax Benefits for Education,” JCX-70-14 (June 2014). There is also a gift tax exclusion for tuition paid on behalf of a student by a third party.

4 Some blame passive loss rules for precipitating the ensuing crisis in the savings and loan industry, one of the principal financiers of real estate. This might have been mitigated with a transition rule allowing continued tax loss treatment for investments made before 1986, making passive loss rules prospective rather than a clawback. TRA 1986 harmed an already overheated real estate market more than any other industry. This is a cautionary lesson for unintended consequences of tax reform. SeeGetting to ‘Yes’ on Tax Reform: What Lessons Can Congress Learn From the Tax Reform Act of 1986?” Hearing Before the Senate Finance Committee, at 19 (Feb. 10, 2015).

5 McLure, supra note 1, at I-A-38.

6 Jeffrey H. Birnbaum and Allen S. Murray, Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform, 260 (1987).

7 Id. at 229.

8 “Getting to ‘Yes’ on Tax Reform,” supra note 4, at 10.

9 Rep. Jim Cooper (D-TN) proposed similar legislation in 2011, H.R. 1069, to provide an election for unmarried, nonitemizing individuals to have their returns prepared by the IRS.

10 Dennis J. Ventry Jr., “Intuit’s End-Run,” Los Angeles Times, July 21, 2010; and Alex Mayyasi, “The Stanford Professor Who Fought the Tax Lobby,” Priceonomics (Mar. 22, 2017); Stanford University Law Professor Joe Bankman spent $30,000 of his own funds for a lobbyist to promote ReadyReturn. Intuit reportedly spends more than Apple or Amazon on federal lobbying. See Liz Day, “ How the Maker of TurboTax Fought Free, Simple Tax Filing,” ProPublica, 26 Mar 2013, updated 14 Apr 2016.

11 FairTax supporters argue that the 30 percent tax is really 23 percent: A $100 item with 30 percent sales tax costs $130, that’s 23 percent “tax inclusive” ($130  - ($130 x 23 percent) = $100). Thus, $30 tax added to a $100 purchase is a 23 percent tax!

12 Mills, “Tax Legislation — A Look Into the Future,” 38 N.Y.U. Tax Inst. 31 (1980)

13 Downs v. United States, 187 U.S. 496 (1903); G.S. Nicholas & Co. v. United States, 249 U.S. 34, 39 (1919); Zenith Radio Corp. v. United States, 437 U.S. 443 (1978), deference to Treasury, 562 F.2d 1209 (C.C.P.A. 1977), rev’g 430 F. Supp. 242 (Cust. Ct. 1977).

14 U.S. Census Bureau, Annual 2016 Trade Highlights.

15 Surrey, “Value-Added Tax: The Case Against,” 48 Harv. Bus. Rev. 86, Nov-Dec 1970

16 Frank Langfitt, “Made in China Doesn’t Mean Cheap in China,” NPR Morning Edition, 23 Nov 2011.

17 Phillips et al., “ Offshore Shell Games 2016: The Use of Offshore Tax Havens by Fortune 500 Companies,” U.S. PIRG Education Fund, and Citizens for Tax Justice, and Institute on Taxation and Economic Policy (Oct. 2016); Damian Paletta, “With Tax Break, Corporate Rate Is Lowest in 40 Years,” The Wall Street Journal, 3 Feb 2012, at B1.

18 Ferguson, “How to Save the Corporate Income Tax,” Tax Notes, 29 Aug 2011, p. 951.

19 “Hearing on Fiscal Year 2007 Appropriations for the Internal Revenue Service,” House Committee on Appropriations: Subcommittee on Transportation, Treasury, Housing and Urban Development, and the District of Columbia, 29 Mar 2006.

20 Jay Starkman, The Sex of a Hippopotamus: A Unique History of Taxes and Accounting 174-175 (2008); Tom Herman, “IRS Plans to Use Private Firms to Pursue Taxpayers This Year,” The Wall Street Journal, 21 Jun 2006; WebCPA staff, “Details Emerge Over IRS Contract Winner,”, May 5, 2006; New Jersey Commission of Investigation, “The Gifting of New Jersey Tax Officials” (Dec. 2005); “Workers for N.J. enjoyed freebies,” Bergen Record, 21 Dec 2005; and “City’s Debt Collector Gets Hefty Share,” Richmond Times-Dispatch, 23 Apr 2006. A pilot program for private debt collection was attempted under the Clinton administration but failed. P.L. 104-52 (1995).

21 Treasury Inspector General for Tax Administration, “Collection Actions Were Not Always Pursued on Cases Returned From the Private Debt Collection Program,” 2011-30-114, at 27 (Sept. 2011).

22 Stacy Cowley and Jessica Silver-Greenberg, “Outside Collectors for I.R.S. Are Accused of Illegal Practices,” The New York Times, 24 Jun 2017.

23 2016 IRS Data Book, Tables 28 and 30.

24 IRS Commissioner John Koskinen, “Review of the FY2018 Budget Request for the U.S. Department of the Treasury,” hearing before Senate Subcommittee on Financial Services and General Government, 26 Jul 2017.

25 J. George Russell, id.; see hearing, supra note 24.

26 Other than the simplest inquiries, I let Utah campus audits go to a 90-day letter and then file a Tax Court petition, which gets me a single human being to deal with. This has the major advantage of making the taxpayer audit-proof for future examinations under section 6212(c). I jump for joy when the IRS automatically issues a notice of deficiency for a nominal amount in response to my section 6213(b)(2) request to abate a mathematical or clerical error (which the IRS interprets expansively) because a Tax Court petition will bring intelligent life to resolve the problem and my client becomes audit-proof for that tax year. Surely, we should all want simpler ways to resolve tax issues than docketing simple cases.

27 Hatch statement, “ Fiscal Year 2018 Budget Proposals for the Department of Treasury and Tax Reform,” Finance Committee hearing, 25 May 2017.

28 Paul, Taxation for Prosperity 418 (1947).



Jay Starkman, CPA is a sole practitioner in Atlanta. A version of this article was originally published in Tax Notes on September 18, 2017.