A Law Unto Itself by David Burnham

Author:David Burnham
Language: eng
Format: epub
ISBN: 9781497696860
Publisher: Open Road Distribution

BIG BARK, NO BITE

Immediately after Donald Alexander was appointed as commissioner in late 1973, he gave a speech to the Cleveland Tax Institute. His words sent a giant shock wave through the financial community, especially among the large brokers and commodity dealers of Wall Street and Chicago. Alexander began his speech by enthusiastically praising a just-published article that had described many tax shelters as “widespread, corrosive, scandalous tax avoidance …” that would prove the Achilles’ heel of the federal income tax unless promptly controlled.1

Alexander told the assembled tax lawyers that he was ready to bite the bullet. Both he and his colleagues in the IRS, Alexander said, “are well aware of these problems. They are not only problems for the taxpayers, but also represent enforcement problems for the IRS. I am not saying that there is anything immoral or questionable about planning your affairs to reduce tax liability. But any investment made with the knowledge that the only profit will result from tax savings, is extremely questionable.”

The commissioner concluded by saying that the IRS was committed to ensuring that all promoters and investors in tax shelters were in full compliance with the law. “On the general policy level, it is important to our self assessment system that the public retain its confidence that every taxpayer is paying his proper share. To the extent that upper income taxpayers appear to be avoiding taxes by purchasing shelter investment, public confidence is eroded.”

Commissioner Alexander did not keep his bold promises of strict enforcement. In fact, despite these brave words, the IRS mostly continued to ignore what swiftly was becoming one of the most serious fiscal drains in the history of the United States. With any problem as large and complicated as the rapidly developing abuse of tax shelters during the 1970s and early 1980s, there are almost always a number of explanations for official inaction. But certainly one element that worked against Alexander’s promise was the hostile attitude of the IRS commissioner’s immediate boss, Treasury Secretary William Simon. As is shown by the following comment from The Wall Street Journal shortly after Alexander and Simon left office, this attitude was well known to tax experts in Washington and New York. “Mr. Kurtz’s predecessor, Donald Alexander, had proposed daring steps on tax shelters and other touchy tax issues but hadn’t been able to get them by Treasury Secretary William Simon,” the Journal reported.

“That is true, that is true in part,” Alexander replied when I asked him about Simon’s responses to his proposed shelter program. “One example of what happened under Bill Simon involves a regulation that I proposed in December of 1976 that would have attacked one aspect of shelter abuse. This rule turned out to be the shortest-lived regulation in the history of the Treasury Department. I signed it one day and exactly seven hours later Secretary Simon killed it. Secretary Simon, an admirable guy in many ways, heard about it on a beach in Hawaii and immediately telephoned halfway round the world to rescind it.

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