The voices of Tax Policy Center's researchers and staff
Watching the closing days of the campaign with school-age children is like walking through a minefield, often for reasons that have nothing to do with tax policy. They are learning about “angry voters” and “rigged systems.” But they don’t get it. Why are people so angry? What are these “systems” and why do so many seem to distrust them?Oddly enough, thinking about tax debt has helped me understand. I recently read about Raquel Martinez, who owns a mobile home in Thornton, Colorado. Her experience with local tax authorities may help explain how frustration and suspicion might stoke voter anger and convince some that the system is rigged against them.
Ms. Martinez bought her home for $6,000 five years ago. Because she owed $350 in back taxes, Adams County sold that lien to a private investor, who ultimately took ownership of the home. A few months ago, the investor posted a notice on her door: She could buy back her home, but for twice what she paid for it. She had to come up with $8,000 cash in one week and another $4,020 over six months. If not, she’d face eviction in three days. Thanks to loans from extended family and friends, she bought her place back for $11,000 in cash.
Would you blame Ms. Martinez for feeling the system was “rigged?” As it happens, mobile home owners who owe back taxes in Adams County do face more onerous rules than owners of real property. The investors who purchased her tax lien and threatened to evict her were operating legally under those rules.
What about someone who owes back federal taxes?
In some ways, it is even more complicated. We know that scam artists are aggressively preying on unsuspecting taxpayers. And we know that 48 percent of Americans say they view the IRS unfavorably. What is likely to happen when the agency begins turning over some unpaid tax debts to private collection agencies (PCAs), as Congress has ordered it to do?
Starting next spring, four PCAs will go to work, even though prior experience shows they are no more successful at collecting back taxes than the IRS. And some consumers may easily confuse their work with that of identity thieves.
In an effort to protect taxpayers from abuse, the collection agencies must follow provisions of the Fair Debt Collection Practices Act. But getting a letter from a collection agency, no matter how fairly worded, won’t feel good. Will recipients even trust the correspondence?
And if they do, taxpayers may feel even more stress because the IRS itself is less able to directly answer their questions. Thanks to a combination of IRS budget cuts and poor management, taxpayers can face long delays in getting IRS responses to correspondence.
As a taxpayer, the best option would be to hire an enrolled agent or other competent representative. But many frightened consumers may turn to private tax relief specialists. For cash upfront, these firms promise to reduce large tax debts. But they often promise far more than they can deliver or, worse, are running cons of their own. And it’s a good bet that disappointed customers will target their anger at a tax system that seems rigged against them.
I can understand why. As my colleague Howard Gleckman wrote two years ago, “Many high-income, influential people and organizations have close to a free hand when it comes to their taxes.” The rich, after all, have access to their own attorneys and accountants who can push the legal envelope and often beat an underfunded, understaffed IRS.
What do the rest of us have, aside from angry doubt about an opaque, complicated tax code that few can understand?
Here’s what I tell my kids—who, after hearing about Ms. Martinez were a little wary of owing taxes. We are not alone, and we have help. The tax system is neither rigged nor perfect—but it is inordinately complex. Helping make sense of it, and complementing the work of the IRS, the National Taxpayer Advocate helps protect taxpayer rights when faced with overwhelming tax debt.
The question is: Will angry doubt weaken our ability to ask?
The Tax Hound, publishing the first Wednesday of every month (barring news developments), helps make sense of tax policy for those outside the tax world and connects tax issues to everyday concerns.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
(AP Photo/Jae C. Hong)