My contracts professor from law school, Ian Ayres, suggests in his book Super Crunchers that the IRS become a source for useful information for ordinary people. The agency could tell taxpayers how much others in their income bracket, on average, are donating to charity or contributing to their IRAs, or tell small businesses whether they might be spending too much money on advertising.
The idea isn’t so far-fetched. About two months ago, the Italian government caused an uproar when it published online the tax details of every single Italian taxpayer. Allegedly meant to fight tax evasion, the move by the outgoing government sounded more like it was motivated by political spite. The most fascinating thing for me, though, was reading various comments in the blogosphere and finding out Norway, Sweden, and Finland do this every year! Apparently, the tax documents are considered official and therefore public records. According to the Swedish government, it’s in keeping with a general principle of government transparency: “To encourage the free exchange of opinion and availability of comprehensive information, every Swedish citizen shall be entitled to have free access to official documents.” And no one really minds.
Of course, this would be inconceivable in the U.S.—there’s a law against it. But as Ian Ayres suggests, the idea that the government should be giving information back to us, instead of just collecting it from us, isn’t totally crazy and Scandinavian. It could be released in anonymized aggregates or in others ways that wouldn’t reveal how much our neighbor makes. The information could be genuinely useful, not just titillating.
There could even be implications for public policy. So much of government policy is expressed in the Internal Revenue Code (such as favoring homeownership over renting), but our debates about tax cuts, mortgage deductions, and credits are based on fairly imprecise numbers. Even as we argue about what a tax cut will do to the “middle class,” we don’t even know what the “middle class” is. Where should government transparency start, if not at the point of revenue collection?