ISSN 1062-7421
Vol. 12 No. 4 (April 2002) pp. 197-200.

TAXING CULTURE: TOWARDS A THEORY OF TAX COLLECTION LAW by Ann Mumford. Burlington, VT: Ashgate Publishing Company, 2002. 317 pp. Cloth. $99.95. ISBN: 1-84014-750-5.

Reviewed by Robert M. Howard, Department of Political Science, Georgia State University.

Ann Mumford has written a complex and intriguing book that seeks to challenge many of our assumptions on the tax collection and tax revenue process. The author seeks to provide context for tax collection beyond that of law, politics or economics. She argues that tax collection systems cannot be separated from the culture. She uses this framework in a multipart analysis to compare the taxing systems of the United States and the United Kingdom. Through this theory and study, Mumford argues for a tax collection system that would appropriately reflect the culture of the United Kingdom, as opposed to the system of voluntary compliance, or self-assessment, of the United States, and towards which the British government is moving.

The author focuses on the differences between the United States tax collection system of voluntary compliance and the United Kingdom's hitherto 'pay as you go' tax collection system. The United Kingdom is now moving to a voluntary compliance system. Much of the book is devoted to showing why the U. S. system of voluntary compliance can only be understood, and work, within the American cultural context, and therefore, why the system will not work within a British cultural context. In this way, the author hopes to develop a "critical tax theory."

The book is divided into nine chapters, with chapters 4-8 being of the most interest to American political scientists who study the Internal Revenue Service (the IRS) and tax law. Professor Mumford devotes the initial chapters to building her argument by introducing her notion of the culture of tax collection, the idea of self-assessment in comparative contexts. She introduces the reader to the works of E. R. A. Seligman, an early 20th Century economist who analyzed the type of tax collection system that would best work in the United States. Mumford uses Seligman's ideas as a starting point to develop her own theories on tax collection.

It is in the fourth chapter that Professor Mumford begins to demonstrate and present her theory of tax collection in a cultural context. Chapter four begins the cultural context comparison through an examination of tax collection and enforcement in the modern U. S. The United States has a system of "voluntary assessment." That is, it is the responsibility of the taxpayer to fill out his or her tax return listing all income and deductions, and then calculate the tax owed to the IRS. It is the responsibility of the taxpayer to then pay this tax liability. The system is confusing, with vague and complex rules and forms, and many taxpayers have difficulty properly filling out their returns. There is widespread non-compliance and evasion, and to cope with this, the IRS is given the power to

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audit, or examine, tax returns on a random, as opposed to a probable cause, basis. Mumford argues this complex system of voluntary compliance is culturally based. The IRS and the Congress deliberately construct vague rules to allow US taxpayers to "cheat" on their taxes. It is "rough justice" in that although the average taxpayer has, in fact, little discretion, the taxpayer believes that he or she has participated in the system by finding legal loopholes, and hence has minimized the tax owed.

The author argues that there are problems inherent in the audit process. Specifically the author notes the differences in goals between the auditor and the citizen. The latter has intertwined goals of vindication and fairness, while the former has goals of maximizing revenue and eliminating the taxpayer as a future problem. Thus, given the moral cheating the taxpayer thinks he or she is entitled to, and the inherent conflict of the audit process, it is not surprising to the author that Congress introduced
legislation to curb the powers of the IRS and that some members even advocated its abolition.

In Chapters 5, 6 and 7, the author examines self-assessment in a historical context, and attempts to demonstrate that the inevitable outcome of self-assessment will be incomprehensible tax laws and criminal evasion. Specifically she asks and answers the questions "why does the U. S. self- assess?" and 'will the system work in the U. K?" In answer to the first question, Professor Mumford argues self-assessment is a product of the United State's constitutional and historical structure. Mumford sees the American Revolution as a turning point for with the American Revolution came a revolt against taxation, and a pessimistic perception of mankind, indeed one that saw man as essentially selfish. Thus when the new nation emerged, one inherently seeing taxation as evil yet needing revenue, the constitutional structure had to be designed to reflect the evil of taxation, man's selfishness, and still allow the collection of revenue. Hence a taxing system that sees consent of the taxed, not redistribution of wealth, as the primary purpose of a taxing system. This led to a fear of direct taxes and the need for a 16th amendment in 1913 to finally make income taxation constitutionally permissible. However, because of these conflicting impulses the compromise to allow income taxation meant the tax reporting and
collection system would be both voluntary and complex.

The complexity now threatens to overwhelm the tax collection system. Because of the complexity, and the inability of many to properly self-assess, tax revolts are inevitable. In fact, the system might collapse, with the taxpayer bill of rights representing a feeble attempt to reform the system. Of course, as dire as the self-assessment system is or may be in the United States, because of different historical and constitutional structure, a similar system in the United Kingdom has the potential for far more severe consequences.

In the last chapters, Professor Mumford argues the worst consequences of the voluntary compliance system. For example, with voluntary compliance, tax evasion is inevitable, because the line between avoidance and criminal evasion is blurred. This is, taxpayers can structure their return to pay the minimal amount of tax that is owed, however the line between legal and illegal tax avoidance schemes is never clearly defined. Because of this lack of definition, the taxing agency can be used as a weapon through the imposition of criminal sanctions to enforce the tax laws.

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This weapon can then be misused by those in power, such as the efforts of the Nixon Administration to punish political enemies, or against those who threaten the dominant culture, such as strong powerful women like Leona Helmsley.

The book is complex and thought provoking and perhaps one reading, and an all too brief summary, fail to do the work justice. However, while it is not intended as an empirical examination of tax collection, much of the argument about the negative consequences of self-assessment rests on several empirical assumptions, many of which are debatable, if not incorrect. This is the greatest weakness of the book. There is a wealth of empirical research that political scientists and economists have presented in the tax area that is ignored by the author.

For example, the author argues that self-assessment had led to the low prestige of the taxing system in the United States, and in fact, there is the potential for the collapse of the entire tax collection system. It is true that public opinion polls show that the Internal Revenue Service has a low public opinion approval rating. However, public bureaucracies in general have low public opinion ratings. Public opinion research shows that the more an institution or political actor is exposed to the public, the lower the public approval rating. Bureaucracies interact with the public more than courts, executives and legislatures; hence bureaucracies receive lower approval ratings. Of the institutions of government, Congress is the most public, and has the lowest approval ratings. The Court is the most hidden
from public view, and has the highest approval ratings. Almost every adult interacts with the IRS, and the agency collects your money. Thus, it is not surprising that the public disdains the IRS. It would be surprising if the public did not have such a low opinion of the agency.

Of course, when a crisis develops in the tax collection area, the system responds. However, is the crisis the result of voluntary compliance or because of other external economic and political conditions? The anti-tax fervor of the past quarter century began not because of self-assessment and complexity, but because by the late 1970's inflation outstripped wages. Inflation pushed many income earners into higher tax brackets, thus taxpayers had to pay a greater percentage of their income in taxes, but these same taxpayers were actually earning less money. A revolt had to happen, and congress had to respond. It did, with the tax relief ushered in by the Reagan administration, followed by the tax reform act of 1986. When demands for services far outstripped revenues, congress again responded by increasing
taxes in 1991 and 1993. When public opinion resented overly aggressive auditing tactics, congress responded with the taxpayer bill of rights, and cut the number of auditors. However, that same congress is now adding auditors back to the IRS budget and encouraging the IRS to go after tax evaders, particularly wealthy tax evaders using sophisticated evasion techniques. When rising stock market portfolios and house prices significantly increased the net worth of many Americans, Congress responded by lowering, and eventually eliminating the estate tax. If the public sees this elimination of the estate tax as an unfair benefit to the rich,
undoubtedly congress will respond by increasing estate taxes.

As empirical research has shown, the tax system, like any other political system in a democracy, is responsive to the congressional, presidential, and even court influences. Those institutions are, of course,

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responsive to the voting public. However, this research about institutional responsiveness potentially calls into question the primary argument of this book, namely, the perils of self-assessment. Is it not possible that the United States, a geographically large nation, with a booming industrial or now postindustrial economy uses voluntary compliance because it is the most efficient system of tax collection, and not because of any cultural or structural reasons? The system exists because rational actors realized this is the 'best bang for the buck.' Is it not also possible that with the elimination of much regulation in the United Kingdom, and the growth
in wealth over the past twenty years, that the system of self-assessment is just a rational reaction to this economic growth, and that it represents the most efficient method of tax collection?

We do not know with any certainty the answers to these questions. However, additional empirical research could help us determine the reasons for existence of the self-assessment systems beyond that of culture or constitutional structure.

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Copyright 2002 by the author, Robert M. Howard