Tax Man Says: You Pay Too Much
Former IRS boss Charles Rossotti thinks that if it were harder to cheat, you'd be a lot better off
(MONEY Magazine) – Charles Rossotti ran the Internal Revenue Service from 1997 through 2002. His recent book, Many Unhappy Returns, chronicles his experiences collecting your money, and this year he sat on a presidential panel that suggested tax code reforms.
Q Some people don't pay all their taxes. How big a problem is it?
A It's huge. Over $300 billion a year. Part of the problem is that the IRS has 20,000 fewer employees than in the early 1990s, and the economy is bigger and more complex. And in the past 20 years there have been 14,000 changes to the tax code.
Q The IRS is small and underfunded? Great!
A But you're paying the bill. That $300 billion means you pay 20% more than you should.
Q Would I really get caught cheating?
A You can play the odds if you want, but it would be better to play them in Vegas than with the IRS. Still, the odds are not what they should be. So the honest guys are getting screwed.
Q The President's tax reform panel has discussed limiting the tax break for home mortgage interest. Lots of folks cherish that one.
A Yeah, it's a limit, but we'd still allow people's mortgages to be given a significant tax benefit.
Q Will the rising number of people getting stuck paying the alternative minimum tax spur reform?
A I think it will. But it's not just about the AMT. It's about getting rid of a system where no one understands what happens to them. Sure, you can get TurboTax and have a computer do all the calculations for you. But is it really a good thing if you don't understand the calculations? It makes people suspect that others who have enough money can manipulate the system. And some of them can.
Q Could real tax reform clear Congress?
A I'm not a politician. All I know is that in 1986 everyone said major tax reform couldn't be done and it was done. But President Reagan and key Democrats got behind it. That's what it takes.