Let He Who Is Without Error Conduct the First Audit

While researching today's column, I came across a 2010 report (PDF) from the National Taxpayers Union that summarizes various experiments showing that professional tax preparers disagree about the proper way to file returns for hypothetical families. Worse, the people conducting the experiments—including the Government Accountability Office, which consulted with experts at the Joint Committee on Taxation—could not definitively say who was right and who was wrong. The report describes a 1998 study by Money magazine:

All 46 tested tax professionals got a different answer, and none got it right. The professional who directed the test admitted "that his computation is not the only possible correct answer" since the tax law is so murky. The tax computed by these professionals "ranged from $34,240 to $68,912." The closest answer still erred in the government's favor by $610.

Discrepancies also show up in returns completed on different tax preparation sites. "As the Tax Code turns ever more unwieldy," USA Today noted in 2007, "deciphering it has become more art than science."

As I argued in a 2006 column, this indeterminacy undermines the rule of law. Since it is so hard to know when you are complying with the law and when you aren't, even the most conscientious taxpayer cannot contemplate an audit with equanimity. Odds are you've done something wrong, even if you don't know what it is.