Cheating on federal income taxes - either through nonpayment of taxes or deliberate underpayment - is an increasing problem in the United States. So when Internal Revenue Service officials say that they are going to crack down on cheaters by using more advanced computer information, all Americans should send up a cheer or two.
What needs to be kept in mind as the IRS prepares to go after the tax dodgers is the injury the cheating does to the federal government - and to the great majority of Americans who honestly pay their fair share of taxes. The issue is not one of a ''big-brother'' IRS unscrupulously targeting the poor taxpayer in a computer analysis. Rather, the issue is one of taking necessary steps to identify and prosecute those Americans who blatantly fail to report income to the IRS.
By all conservative estimates, the US Treasury loses billions of dollars annually from underreporting or nonreporting of income. That doesn't mean just a billion dollars here or a billion there. Unpaid taxes stemming from the growing underground economy - where cash transactions are the norm and income can be conveniently hidden - are believed to total $90 billion to $95 billion annually. That amount, if paid to the Treasury, would go far toward reducing spiraling federal deficits and thus help reduce the high interest rates that threaten continued economic recovery and prevent many Americans from buying homes, new cars, and other consumer durables.
The new IRS experiment is not complicated. The agency will use income data and other information pertaining to personal life styles - data obtained from private marketing and direct-mail concerns - to compare with IRS tax return information. Such a comparison, it is hoped, will identify persons who fail to pay their taxes. If that plan proves successful, the IRS could even expand that experiment, using similar information to identify individuals who underpay taxes.
Information pertaining to personal lifestyles is fairly common. Marketing firms, for example, frequently estimate income levels for households by using census data, motor vehicle records on the make and year of cars, and length of residency at a particular address.
The IRS, for its part, may well have to meet a legal challenge to using such marketing information to identify potential tax cheaters. Some civil libertarians argue that such an inquiry may be a misuse of IRS policing powers since, in effect, the agency will be conducting a mass inquiry into a number of households and looking for instances of possible wrongdoing, rather than investigating specific allegations of wrongdoing based on known evidence.
Such concerns ought not be ignored. To meet objections, the IRS will obviously have to conduct its inquiry in a way that is fair to all Americans, so that no household is unintentionally tainted.
The public should welcome the fact that the government is attempting to identify tax cheaters. Given the enormous costs of government - and, above all, the need to maintain integrity in society - it is imperative that each and every citizen pay a fair share of taxes.