Privacy in Taxation

Publication Title

Florida State University Law Review

Document Type

Article

Abstract

This Article proposes that tax is a fertile field in which privacy scholars should be working. The privacy burdens of taxpayers have gone unnoticed by privacy scholars. To the extent that privacy scholars are concerned about the dignity of individuals and ensuring that they have "freedom from scrutiny" and "breathing-room" for self-development, the threat to dignity, freedom, and breathing-room endured by Rhiannon O'Donnabhain, Lynnette Harris, Katia Popov, Melvin Nickerson, Ramsay and Elizabeth Farah, and other taxpayers deserves scrutiny. To the extent that privacy scholars worry about the peril to a free society, creeping totalitarianism, and undesirable shifts of power that collection of information by government agencies can bring, the IRS's gathering of information should be no less worrisome than that of other agencies, such as the NSA or FBI.

This Article also proposes that privacy is a societal value that tax scholars should work to incorporate into their research. While unrecognized until now, privacy values are comparable to the values of efficiency, equity, and administrability that tax scholars have long heralded as the markers of a sound tax system. Tax scholars should measure the negative impact of specific tax provisions on privacy, weigh the impact against any benefits achieved, and propose ways to reduce the impact without undermining the benefits. Tax scholars should also consider ways in which fundamental reforms could better protect privacy without compromising—or perhaps even better, achieving—the central goals of a sound tax system. For instance, a reform increasing the standard deduction and personal exemption amounts while decreasing the number of specialized deductions and credits might mitigate privacy concerns while also reducing administrative costs. Moreover, a more radical change in the tax base itself—perhaps a move from an income to a value-added or other consumption tax could, as a matter of the base's own logic, require minimal personal information while also enhancing tax enforcement and fairness.

This Article is intended to prompt tax and privacy specialists to work toward articulating a coherent privacy policy for taxation. While any tax system must collect some personal information in order to collect personal tax liabilities, there is always considerable legislative and administrative discretion in deciding what information should be relevant and thus collectible. And that discretion should be guided by a coherent privacy policy, which can only be devised if tax specialists recognize the value of privacy and privacy specialists recognize the breadth and depth of the personal information the IRS is entitled to collect.

Part II of this Article outlines why privacy matters and how concern for privacy has been expressed by legislators, judges, and scholars. Part III provides the history of laws regulating the dissemination of taxpayer information, as well as the related debates among tax scholars. Part IV does what none of the privacy scholars' work described in Part II, nor any of the tax scholars' work described in Part III has done, which is to take privacy in taxation seriously. It describes the tax information collection process, documenting and illustrating the breadth and depth of the intimate details subject to collection. This Part closes with recommendations for articulating a foundation and context for debating privacy in taxation issues. The Article concludes that tax law should be structured so that the collection and use of private information for tax purposes both protects tax revenue and promotes personal privacy

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