Theory and Practice in Tax Administration
Texas Tech University School of Law
September 18, 2009
Virginia Tax Review, Vol. 29, p. 227, 2009
Texas Tech Law School Research Paper No. 2009-04
This article concerns the history of automation in U.S. tax administration and the challenges automation presents to administering the laws consistent with democratic values. The most under-theorized aspect of tax administration is the expansion of automation and its impact on the current tax system.
Historically, the U.S. system of taxation depended on the self-reporting of relevant financial information by taxpayers. The original design of tax administration was built around that premise and required significant human interaction between government employees and taxpayers.
The rise of what is called Automated Data Processing (ADP) - particularly since WWII - has given the IRS wonderful efficiency in sorting through massive amounts of information. This has allowed it to rely less on the information provided by taxpayers and more on the information provided ABOUT taxpayers by various third parties. ADP has also allowed the IRS to become more efficient at identifying "non-responsive" taxpayers and taking action against them.
At the same time, ADP poses a constant threat to unbalance the Service, to degrade tax administration into an exercise in data manipulation and not an exercise in determining the correct taxes owed. It undermines the American way of taxation, where the IRS strives to administer the tax laws with a realization that the government's interests align with taxpayer interests and not simply with dollars to the fisc.
This article is one of a number of articles commenting on a reprint of Commissioner Mortimer Caplin's thoughts about tax administration, orginially published in 1964. It is to be published in a forthcoming issue of the Virginia Tax Review.
Number of Pages in PDF File: 64
Keywords: tax history, administration, tax, democracy, automation, tax theory, administrative law, IRS, IRS history
JEL Classification: D73, D78, H11, H26, K23, K34, K40, K49Accepted Paper Series
Date posted: September 19, 2009 ; Last revised: August 4, 2010
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