Background
The Internal Revenue Service (IRS) is the revenue service of the United States federal government. Established on July 1, 1862, its main responsibility is to administer the Internal Revenue Code (IRC) and ensure the compliance of individuals and businesses with tax laws.
Historical Context
The IRS was created after the Civil War to secure a steady stream of income for the federal government. Originally part of the Bureau of Internal Revenue, the IRS grew in scope and scale with the introduction of the 16th Amendment in 1913, which authorized Congress to institute a federal income tax.
Definitions and Concepts
- Tax Assessment: The determination of the amount of tax liability.
- Tax Collection: The process of obtaining tax payments from individuals and businesses.
- Internal Revenue Code (IRC): The body of law governing federal tax administration.
Major Analytical Frameworks
Classical Economics
Classical economists often discuss taxation without focusing specifically on agencies like the IRS. Economic perspectives on taxation pertain to how government revenue can distort or affect market outcomes.
Neoclassical Economics
Neoclassical economists examine the impact of taxes collected by the IRS in terms of their efficiency and effects on output and consumption.
Keynesian Economics
Keynesians might explore the role of the IRS in fiscal policy, particularly how tax revenue is crucial for government spending intended to manage economic cycles.
Marxian Economics
Marxist economists would generally consider the IRS within the broader context of how state mechanisms enforce capital’s dominance, using taxation as a tool for redistributing wealth.
Institutional Economics
Institutional economists might study the IRS as a pivotal economic institution, analyzing its role in shaping tax compliance and societal norms around taxation.
Behavioral Economics
Behavioral economists examine how IRS enforcement strategies and taxpayer interventions might influence people’s compliance behaviors and attitudes toward paying taxes.
Post-Keynesian Economics
Post-Keynesians might critique the systemic roles of the IRS in addressing income inequality and ensuring effective aggregation of resources for government use.
Austrian Economics
Austrian economists might view the tax collection powers of the IRS with skepticism, critiquing the extent of government involvement in economic life.
Development Economics
In a development context, the IRS could be examined for lessons applicable to how tax systems should be designed and managed in developing nations aiming to enhance tax revenue collection.
Monetarism
Monetarists would regard the IRS’s efficient tax collection policies as critical for government revenue, contrasting its actions against the implementation of monetary policy preferences.
Comparative Analysis
Similar organizations to the IRS exist in other countries, each responsible for their respective tax collection and assessment:
- HM Revenue and Customs in the UK.
- Canada Revenue Agency in Canada.
- Australian Taxation Office in Australia.
Case Studies
Exploring notable IRS case studies can illustrate both successes and challenges:
- Implementation of the Employer Identification Number (EIN) system.
- Efforts in combating tax evasion and fraud.
- Impactful IRS reforms and organizational changes over decades.
Suggested Books for Further Studies
- “The Power to Destroy: The Political Uses of the IRS from Kennedy to Nixon” by John A. Andrew III.
- “Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and Cheat Everybody Else” by David Cay Johnston.
- “Taxing America” by Karen B. Brown and Mary Louise Fellows.
Related Terms with Definitions
- Tax Evasion: The illegal underreporting or non-payment of taxes owed.
- Tax Compliance: The adherence to tax laws and regulations by taxpayers.
- Progressive Tax: A tax system where the tax rate increases as the taxable amount increases.
