The urgency for privacy of taxpayer data

A mass leak of IRS information about individual Americans adds to a new drive in the US to protect personal financial information.

One of the words engraved at the headquarters of the Internal Revenue Service (IRS) in Washington.

On Wednesday, President Joe Biden’s attorney general told Congress what he has put at the top of his to-do list as head of the Justice Department: investigating a massive leak of individual tax returns from the Internal Revenue Service.

“This is an extremely serious matter,” said Merrick Garland. “People are entitled, obviously, to the greatest privacy with respect to their tax returns.”

The leak contained the personal financial information of thousands of wealthy Americans and was partially published Tuesday by an investigative news site, ProPublica. The data itself – which showed how legal tax breaks have helped the super-rich pay a small percentage of their total wealth to the government – was not much of a revelation. What concerned many Democrats and Republicans was that Americans might now lose trust in the IRS and erode their high rate of voluntary tax compliance.

“Anything short of the highest degree of privacy protection for taxpayers’ information could cause them to be far less willing to provide the information that is required by the IRS for full compliance,” said republican Sen. Susan Collins of Maine.

To fund his spending plans, President Biden is counting on the IRS to find more revenue – at least $480 billion – by improving the agency’s tax enforcement. That effort has now been jeopardized by the leak – a crime that makes the leaker liable for a five-year prison term – and the potential loss of faith in fair tax collection.

“Trust and confidence in the Internal Revenue Service is sort of the bedrock of asking people and requiring people to provide financial information,” said IRS Commissioner Charles Rettig.

The leak comes as the Biden administration, Congress, and numerous states are trying to devise new rules and laws on data protection. “In the past four months of 2021, the amount of state legislative activity around consumer data privacy laws has been frantic,” says corporate attorney Rita Garry. In high-tech, Apple, Google, Facebook, and similar companies are racing to keep up with rising consumer demands for privacy by offering more protection in their software.

A poll in April for Morning Consult found 83% of Americans want Congress to pass privacy legislation. They cite a high concern for the security of their Social Security number, banking information, biometric data, and driver’s license number.

Respecting data privacy is essential not only for people’s financial welfare but also their identity. It honors core values of personal autonomy and the presumption of innocence. “Without privacy, concepts such as identity, dignity, autonomy, independence, imagination, and creativity are more difficult to realize and maintain,” writes David Anderson, Britain’s former reviewer of counter-terrorism legislation.

Attorney General Garland’s urgency to find the source of the IRS leak reflects a bipartisan concern to restore trust in government and the ability of individuals to govern their own data. Self-governance lies at the heart of democracy. It also helps explain why an estimated 83% of Americans pay taxes willingly.

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