And I thought I’d heard it all.
Ian Ayres and Barry Nalebuff of Forbes Magazine think that that more taxpayers should have their tax returns audited. That’s not so radical, right? Well, I’m not finished.
They also think the IRS should pay them for it:
Society would probably be better off with double the number of audits, but no one wants to have his or her number called. What is to be done?
Pay people for being audited–say, $3,000 for the extreme audit. Stanford tax guru Joseph Bankman notes that this sum would overcompensate almost all taxpayers; someone getting that much for 40 hours of trouble would be getting $75 an hour. To be sure, the richest taxpayers and people with the most complicated returns would be only partially compensated, and the money wouldn’t necessarily cover the fee of a tax attorney or accountant. But $3,000 of compensation would go a long way in reducing the public opposition to auditing.
I’ll research this more, but here’s my initial response to Ayres and Nalebuff: What the hell have you two been smoking?
First, the IRS can simply pass these audit compensation fees back to the taxpayer by more aggressively disallowing tax deductions. Second, because IRS auditors and their group managers have discretion as to whether or not to assess penalties against taxpayers it’s reasonable to assume that they they will be more aggressive in assessing those penalties and denying reasonable cause abatements so as to offset the cost of compensating the auditees.
I hope American taxpayers are not stupid enough to trust a program that purports to compensate them for being audited when the compensator, the IRS, is the entity responsible for determining the amount of their indebtedness to the government.
Am I missing something here?
1 response so far ↓
1 Update on IRS Compensated Audits // Nov 17, 2009 at 1:35 pm
[...] taxosphere is abuzz with talk about the idea of compensating taxpayers who are audited by the [...]
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