TAXPAYERS VS. THE IRS
1973 brought the struggle between citizens, trying to protect their hard-earned money, and the IRS, bent on taking much of it away, to new heights of intensity. With the full revelation of White House use of the IRS for harassing Administration "enemies" with special audits, for cracking down hard on "extremist" groups, favoring the President's 1972 campaign supporters, and placing political contact men within top echelon IRS ranks, millions of Americans received an unexpected consciousness-raising about the true nature of a system based on forced taxation.
The response of American taxpayers was overwhelming. The number of people filing no income tax returns, as well as the number filing incorrect returns, soared to record levels. The IRS officially estimates that 5 million potential taxpayers are now failing to file, saving themselves (or "costing the government") some $6 billion per year. According to U.S. NEWS & WORLD REPORT, "tax experts outside the IRS say the agency actually is understating the problem…some put the real losses as high as five times that much, around $30 billion per year." Former IRS Commissioner Johnie M. Walters has been widely quoted as saying that the trend in nonfilings is "frightening." The IRS fears that the way things are going, Americans may soon regard taxes in much the same manner as do many Europeans and most Latin Americans: as something to be avoided whenever, and however, possible. Particularly disturbing to the IRS is the high incidence of nonfiling among "lawyers, doctors, accountants, and other professionals."
One reason for the increase in tax avoidance and incorrect filings is that it is easier to get away with it, as compared with prior years. The IRS's auditing staff has fallen, in absolute terms, to below the level of ten years ago, while the number of returns has soared. Further, some 3,000 agents have been diverted to enforcement of price controls, and others have been assigned to such new program areas as revenue sharing and narcotics investigations. One result of these changes is that the chances of any return being audited are now only one in 55, compared with one in 18 ten years ago. A total of 1.8 million returns were audited last year, of which 1.3 million contained "errors." However, the vast majority of those taxpayers just paid the additional tax plus interest penalties; only 1,342 were prosecuted for tax evasion, and of these 68 were acquitted, 123 were convicted, 330 pleaded no contest, and 821 pleaded guilty. Only 334 of the guilty were imprisoned, with most of the others receiving some combination of fines and probation.
To help even the odds, the IRS is beefing up its computer systems and attempting to add more audit personnel. By 1977 the computer will provide "100% matching information documents," i.e., all information containing a given Social Security number (W-2 forms, Social Security records, etc.) will automatically be cross-checked. The IRS's Discriminant Function (DIF) computer program for spotting auditable returns continues to improve the quality of audits; in 1969 only 59% of the returns audited disclosed additional taxes due, but by 1972 the percentage had been increased to 68%.
While the odds keep changing, taxpayer organizations have begun gearing up for a new round of battles. Washington-based Tax Analysts and Advocates has filed suit under the Freedom of Information Act to require the IRS to publish some 30,000 letter rulings that it renders each year in answer to private inquiries, so that all taxpayers will have access to them (rather than only those with high-priced Washington lawyers). And in San Diego, the Association of Concerned Taxpayers has filed a class-action suit demanding that the 1974 tax return forms include warnings against possible self-incrimination. Since the tax forms can be used against the taxpayer in criminal proceedings, Mrs. Barbara Hutchinson points out, a taxpayer should be accorded the same rights as any other person under the Fifth Amendment.
This column reports trends in the advancement of individual liberty and the rediscovery of economic freedom. Readers are invited to submit material of potential interest.
As the bicentennial of the Boston Tea Party approaches, Americans seem to be gearing up appropriate forms of commemoration.
• "IRS Chief Is Alarmed at Tax Evader Increase," UPI (Washington), 27 March 1973.
• "Auditing the IRS," BUSINESS WEEK, 1 September 1973, p. 64.
• "Incorrect Tax Returns at New High, IRS Says," AP (Washington), 5 September 1973.
• "Hidden Taxpayer Strike," U.S. NEWS & WORLD REPORT, 17 September 1973.
• "Incrimination Advice on Tax Forms Sought," LOS ANGELES TIMES, 1 October 1973.
• "1,342 Charged With Tax Evasion in Fiscal '73," AP (Washington), 21 October 1973.
ATTITUDES TOWARD FREEDOM
A large-scale survey of the attitudes of college faculty and students toward freedom and free enterprise has found that some 80% believe that "the government has no right to interfere with a person's actions (moral or immoral) so long as these actions do not endanger the life, liberty, or property of others." This apparent strongly libertarian viewpoint was not borne out by the remainder of the survey, however. In fact, concludes World Research, Inc., the best way to describe the overall results is that "confusion reigns among college students, as well as their professors, when it comes to beliefs about government and freedom."
Carrying the conclusion further, Karl Keating, student spokesman for the Campus Studies Institute Division of WRI said, "Apparently there is a strong belief among students and professors that the government should not interfere in their own personal lives, but they do not object to government interference in other people's personal lives."
Despite the 80% support for government nonintervention, the survey found that:
52% believe it is the proper function of government to legislate that which is for the individual's own good;
69% believe that today's most important social problems are most likely to be solved by government intervention;
67% believe the government should intervene to correct economic inequities.
These, and other of the survey's statistics, lead World Research to surmise that the majority of college students and their professors hold philosophically contradictory beliefs about government and that they have a substantial lack of understanding of the basic principles of freedom.
In an effort to establish the extent of anti-free enterprise attitudes on campus, a scale based on 100% was established to evaluate the understanding and acceptance of basic free market concepts. Those respondents whose answers were consistently pro-free enterprise received 100%. Among those surveyed, chairmen of economics departments scored the highest with 30% being pro-free enterprise. Among the lowest scores were the chairmen of political science and sociology departments with 18% and 16% being pro-free enterprise, respectively.
In comparison, in an independent survey also conducted by WRI, a selected sample of the general public scored 60% pro-free enterprise.
What may be a partial answer to these disturbing figures was announced last summer at Town Hall of California, a civic forum. Jack Hilton, an executive of the J. Walter Thompson advertising agency, announced the formation of Free Enterprise Communications Inc. (FEC). The purpose of the organization will be to explain and defend the free enterprise system, and to act as a clearinghouse for free enterprise information. Hilton wants FEC to take the initiative, rather than merely reacting to critics, and to carry the case to labor, education, government, and the media, in addition to business itself. FEC will be funded by contributions from large businesses, and will have a full-time staff and executive management. The staff will include communications experts from all media and professional communications fields, including advertising.
• "1973 Student-Faculty Opinion Poll: Nationwide Surveys on Student and Faculty Opinions of Free Market Philosophy," WORLD RESEARCH, INC. (11722 Sorrento Valley Road, San Diego, CA 92121), October 1973.
• "JWT's Dialog Readies Unit for Free Enterprise Info," ADVERTISING AGE, 16 July, 1973.
CUTTING BACK THE FEDERAL BEHEMOTH
Those in favor of a constantly expanding role for the federal government will be disheartened by the results of a recent study by the American Enterprise Institute. The AEI study of the federal budget reveals that, despite the huge increase in ongoing federal programs over the past decade, the budget program prepared for FY 1974 would produce a balanced budget in 1975 and growing budget surpluses through the rest of the decade. Thus, large-scale tax reductions could take place during 1975-1980, even without reducing any of the current mass of federal programs.
Entitled "Public Claims on U.S. Output," the study used AEl's computerized model of budgeting and resource allocation to project federal revenues and expenditures through the remainder of the decade, assuming no changes in the current tax structure and the continued operation of all federal programs in accordance with the provisions of the FY 1974 budget. Under these assumptions, there would be a $9 billion federal budget surplus in 1976, $17 billion surplus in 1977, $33 billion in 1978, $45 billion in 1979, and $57 billion in 1980. In addition, the study found a similar situation to exist at the state and local level. State and local governments are projected to run a net surplus on the order of $20 billion in 1976 and $26 billion in 1980.
These results should be kept in mind when politicians propose tax increases during the 70s. Quite the opposite should be forthcoming; indeed, given the dismal record of most governmental programs, there should be major tax cuts not only to refund the projected surplus, but also to discontinue vast numbers of these wasteful programs.
• "Public Claims on U.S. Output," David J. Ott, et. al., American Enterprise Institute for Public Policy Research, Washington, DC, September 1973.
THE SCHOOL AS PANACEA
Eight years ago sociologist James Coleman published a report entitled "Equality of Educational Opportunity." Comparing schools which were integrated with those which were segregated by race, the Coleman report found small but significant differences in the academic performance of the black students, with those in the integrated schools doing better. These results, seized upon by well-meaning ideologues, have since been used as the basis for large-scale busing programs in order to achieve "racial balance." The assumption seems to have been that if blacks do better in schools which are naturally integrated, then other blacks transferred into previously segregated (or merely "unbalanced") schools would also do better.
Unfortunately, it hasn't worked out that way at all. So concludes sociologist David Armor of the Rand Corporation in Santa Monica, after studying busing data from Boston, White Plains, New Haven, Hartford, Ann Arbor, and Riverside. Armor's study, along with several others, found no academic improvements among black students as a result of busing programs. About the only measurable result (though the data are not conclusive) has been an increase in racial tensions in the "bused" schools.
The most important conclusion of Armor's study is not about busing, per se. Rather, it is about the usefulness of education as a tool for solving complex social problems. Armor sees the busing/desegregation problem as just one instance of a modern tendency to assume that schooling is a panacea for counteracting the effects of being brought up in poverty and lower-class surroundings. His findings add to the growing doubt about the schools' ability to do so.
Another critic of the school-as-total-solution dogma is none other than James Coleman himself. Now chairman of the Panel on Youth of the President's Science Advisory Committee, Coleman has concluded that America forces children to spend far too long in school. According to Coleman, schools provide an important, but very limited range of skills. Such adult needs as self-responsibility, management of one's own affairs, working well with others, and of course marketable skills, are not taught in schools. Yet today's children are forced to spend increasingly greater portions of their lives in the classroom, becoming "saturated with information but starved for experience."
The solution? Joining critics John Holt and Ivan lllich, Coleman argues that people aged 14 to 24 be offered a variety of work and learning opportunities, including the chance to work side-by-side with adults in all-ages "working communities." Such an approach would, of course, require the elimination of much of our current apparatus of child coercion—compulsory schooling laws and minimum wage laws—and would thereby incur the wrath of organized labor. Despite such difficulties, however, Coleman's proposals are more than welcome. Like Armor's empirical findings, they are part of a growing shift away from the conventional American view of education as a means of secular salvation.
• "Busing Hasn't Led to Black Gains in Classroom," David J. Smollar, LOS ANGELES TIMES, 5 September 1973.
• "Less School, More Work …," TIME, 27 August 1973, p. 54.
This article originally appeared in print under the headline "Trends".