It's a start

Americans aren't bending over and taking it quite as enthusiastically as the Internal Revenue Service would like. According to the Associated Press:

An IRS study last year concluded that the tax gap in 2001 was $345 billion. Of that, $197 billion came from underreporting on individual income tax returns and $88 billion from underreporting by corporations and the self-employed. The rest came from those not filing or not paying the proper amount.

That gap narrowed to $290 billion after enforcement efforts and late payments were factored in. Still, that left the government collecting only 86 percent of the more than $2 trillion it was owed in 2001.

Eighty-six percent compliance? That's still too high. If we're going to starve the beast, Americans are going to have to get more creative about denying a share of their hard-earned money to the sticky-fingered thieves in D.C. and to their counterparts in the various state capitals.

As encouraging as the news story is, it does contain a bit of nonsense.

That translated into a "surtax" of about $2,680 per household in 2001, the national taxpayer advocate said at a recent hearing of the House Budget Committee. "That is an extraordinary burden to ask our nation's compliant taxpayers to bear every year," Nina E. Olson said.

No it isn't. American taxpayers are very definitely not paying more money to the government because of non-compliance. The government taxes as much as it thinks it can get away with; non-compliance simply lowers the take. Were the IRS to magically develop a means to enforce universal compliance, the tax rate wouldn't drop by a penny -- the government would just have more to spend.

Why is it a good thing that the government isn't getting as much tax money as it wants? It's a positive development for two reasons.

For one thing, it's always good to not be mugged. Money kept in your pocket and not handed over to the government is money that you can save, spend and invest as you wish; it won't get wasted on programs that you wouldn't choose to fund on your own.

Denying taxes to the government is also good because, as P.J. O'Rourke wrote, "Giving money and power to government is like giving whiskey and car keys to teenage boys." The government makes mischief -- often nasty, violent mischief. Every dollar denied to the beast is a dollar that won't be spent to kick in doors, ensnare businesses in red tape or spy on Americans going about their daily lives.

But don't expect the government to take non-compliance lying down. Politicians and bureaucrats don't like defiance. It makes them itchy. And then they start looking for ways to squeeze the taxpayers even harder.

In Congress, a bipartisan group of lawmakers is pushing one of the administration's proposals: requiring brokers and mutual fund companies to track and report to taxpayers and the IRS investment information related to capital gains taxes. That would make it easier for taxpayers fill out their returns and help close an annual gap in capital gains taxes estimated at $17 billion.

And so the leviathan that compliant taxpayers enable becomes just a bit more intrusive and oppressive.

So what do you say? How do we get that compliance rate lower?