On the tax ladder, the American taxpayer probably feels as if he stands on the bottom rung. As tax forms have grown longer and more confusing, collecting taxes has become even more rigid and enforced. Over the last 20 years or so, Congress has granted the Internal Revenue Service more enforcement powers. Sometimes, critics charge, that has led to more abuse.
``The penalty structure can have pretty bizarre results,'' says David Keating, executive vice-president of the National Taxpayers Union. ``The IRS has the power to abate many of these penalties,'' he says. ``But they often use that power as an unfair way of negotiating with the taxpayer.''
Though considered by some members of Congress only ``a spit in the ocean'' of taxpayers' problems, the ``Omnibus Taxpayers' Bill of Rights'' would enable taxpaying citizens to protect themselves better against careless and irresponsible collection practices. The proposal, introduced by Sen. Harry Reid (D) of Nevada and approved by the Senate Finance Committee two weeks ago, was sent to the Senate floor last week.
``If we want people to comply with the tax laws, they have to feel they're being treated fairly,'' Senator Reid told the press before a recent briefing on the bill.
Rep. Robin Tallon (D) of South Carolina gave the example of an independent businesswoman who had her business seized by the IRS when they mistook her for someone else. It took a great deal of probing by Representative Tallon's caseworker to figure out what had happened and reverse the penalty.
``Some of the mistakes made by the IRS - caused by carelessness and irresponsibility - result in an awful lot of bitterness,'' Mr. Tallon said.
As a result, the IRS represents ``a terrifying force,'' to many people. Jeffrey Gold, chairman of the Washington Community Tax Aid Inc., a free tax preparing clinic for low-income families and individuals, says the number of people using the service has grown as tax forms have become more complicated. He adds that many people, not understanding their rights as taxpayers, stay away from assistance clinics like Community Tax Aid out of fear they are merely another arm of the IRS.
The ombudsman rights bill would protect taxpayers in several ways:
It would allow the IRS taxpayer ombudsman, a position that currently exists but has very little power, to stop the IRS from enforcing any penalty when the ombudsman feels it would result in unusual, unnecessary, or significant loss to the taxpayer.
It would prohibit the IRS from evaluating its employees on the basis of their production, or tax-enforcement quotas.
It would extend the time the IRS has for seizing accounts from 10 days to 20 days after a bill was sent.
It would allow taxpayers to sue to recover damages from an unreasonable collection action and recover legal costs if they win; they would not be able to collect these costs, however, if the IRS proved it had ``substantial justification'' for bringing the case.
The bill of rights is expected to win Senate approval, but faces an uphill battle in the House, a congressional aide remarks.
To make it more palatable, the proposal was packaged with several other pieces of legislation, including one other revenue loser and three revenue-producing measures.
The legislation also included a tax break intended to exempt farmers and other off-the-road users of diesel fuel from paying the tax for highway construction. That change would cost the government about $570 million over five years.
But other measures in the package would raise an estimated $1.1 billion by $1993.
These include a doubling of the tax on expensive, foreign-made ``gas guzzlers,'' such as the BMW 528. This could tack anywhere from $500 to $4,000 onto the targeted cars' prices.
The Senate Finance Committee also agreed to extend the IRS's authority to withhold tax refunds from anyone owing a student, farm, or other federal loan. And it approved a limit on the use of ``wine flavors credit,'' which allowed some liquor manufacturers to get out of a sizable tax.
Even with these government income boosters and the support of many outside companies and associations like the US Chamber of Commerce and the National Federation of Independent Business, the bill faces stronger opposition in the House - and from the IRS.
Though it has almost 200 House cosponsors, the bill got less than an enthusiastic reception in the Ways and Means Committee, which is looking hard for ways to cut the budget and reduce the deficit, and is trying to avoid revenue-losing legislation. The IRS claims the bill would restrict the agency's ability to collect taxes and could result in about $517 million worth of lost revenue over five years.
Still, Senator David Pryor (D) of Arkansas, a cosponsor of the bill, has already toned it down to garner support and improve its chances of being passed. He would have liked to shift the burden of proof in disputes to the IRS, but the bill leaves the burden with the taxpayer.
And Senator Pryor would also have liked to require that the IRS read taxpayers their legal rights whenever they are called before the agency, but that provision, strongly opposed by the IRS, was dropped.