In Defense of the IRS

The tax agency actually makes life better, not worse, for ordinary Americans.

By SHARE
The IRS has quietly upgraded its technology so tax collectors can track virtually everything people do online.

Go ahead. Bash the Internal Revenue Service. It's a tax day ritual and a presumed birthright of every American.

But while you're at it, take a moment to appreciate the benefits that a stable tax system and tough enforcement of tax rules provide to ordinary people.

[READ: What Does the IRS Know About You?]

There have been a few standout examples recently of what happens to nations with lax tax systems and spotty enforcement. Greece, for one, suffers from an epidemic of tax cheating that has helped send the nation to the brink of bankruptcy while causing a full-blown depression. In case anybody thought Greece was an anomaly, Cyprus proved recently that an economy built on tax loopholes loses control of its destiny when it needs to raise money but can't.

For all of its problems, one standout feature of the United States is the government's ability to raise taxes when necessary, and even to shake down its citizens for trillions of dollars if necessary. Obviously we all hope that never happens, but the fact that Washington has the power and the ability to do it is what keeps interest rates low and money flowing to consumers in the first place.

The U.S. Treasury has been borrowing money at interest rates of less than 2 percent for a 10-year loan. That benefits ordinary Americans in many ways: It keeps government spending higher than it would otherwise be, for one thing, which funnels money to many businesses and helps the economy grow. Low rates on government securities also keep rates low on consumer loans, which makes homes, cars and other things more affordable.

[SLIDESHOW: The 10 Strangest State Taxes]

If there were doubt about Washington's ability to collect taxes when needed, the U.S. credit rating would be much lower and interest rates would be much higher. It's frankly remarkable that Americans can borrow as easily as they can, given how much debt Washington is on the hook for. A relatively air-tight tax system is one big reason why.

It's natural to grimace when we hear about some of the tough treatment the IRS metes out to tax avoiders. But think for a moment about whose side you're really on: the sneaks who try to avoid paying what they owe, or the honest citizens who carry their weight. If you're an honest taxpayer, you probably think everybody should pay what they owe. If you're dishonest, well, why don't you move to Greece, where tax cheats get the economy they deserve.

Nearly everybody complains about paying too much in taxes, but in reality, the federal tax burden is historically low. The typical household pays less than 18 percent of its income to the feds in the form of taxes, which is about 20 percent lower than the tax burden was in 1979. That decline has occurred largely because Washington spends more than it collects in tax revenue and borrows to make up the difference. Still, out-of-pocket tax expenses for most people don't bite as hard as they used to.

[ALSO: Obama Tax Returns Show Declining Income]

One reason people object to paying taxes is they perceive the government to be wasteful and unresponsive. Fair enough, but don't blame the IRS for that. The IRS, in fact, may be a model agency. It processes refunds promptly, jumps on problems in a jiffy, and has a modern electronic filing system. You could probably get a live IRS agent on the phone faster than you could get answers from your insurance company or your cellular provider.

Finally, don't fault the IRS for the convoluted tax code. Congress creates the tax laws. The IRS only enforces them. If you or I had to police everybody trying to cut corners on their taxes, we'd be surly too—and probably dread tax day even more.

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.