As a recovering IRS tax auditor, I have some comprehension of the nature of the tax collection beast. Most of the people I worked with at the IRS had no greater love for taxes than does the average American. But they were interested in making sure that everyone fulfilled their legal tax obligations.
There were some IRS employees, however, that had rather insidious views about taxation. I can only assume that a recent trial balloon floated by the IRS as a way to get more money from Americans comes from those quarters. The WSJ reports that the IRS is proposing a stricter interpretation of “a 1989 law requiring workers using company phones for personal use to include the value of those calls as income.”
How much stricter? Do you have a company supplied cell phone? You can plan on reporting as income subject to federal and state tax 25% of the company’s cost of your phone usage. (For the record, I do not have a company provided cell phone.)
The reasoning behind this is that almost everyone that has a company cell phone uses it at least somewhat for non-business personal purposes. That usage, says the IRS, represents income. Since it is difficult to strictly define how much usage is personal, the IRS proposes 25% as a rule of thumb. You could use your records to prove a lower usage, but the IRS knows that few people will actually do that.
The WSJ editors raise the specter of taxing all kinds of other “fringe benefits,” such as “a per-cup tax on office coffee, or targeting furtive visits to ESPN or Hulu on the office PC.” They suggest that this kind of thing is “like charging for the use of the company washroom.”
This kind of taxation, say the WSJ editors, is “precisely the sort of common non-sense that incites tax revolts.” It would impact a lot of people but would pull in only a marginal amount of revenue. It brings to mind the 1773 Tea Act, which was meant not so much as a revenue producer as a reminder to the American colonies that the British Parliament was boss. This was such a non-starter for many Americans that a few of them in Boston responded with the renowned Boston Tea Party.
While I am generally opposed to increased taxation, I think that the WSJ editors might be pushing their argument just a little too far. All of these same arguments were bandied about years ago when IRS decided to tax personal use of company automobiles. There was some consternation, of course, but people settled into the new routine quite rapidly. There could be a difference here, however, because far more American workers have company cell phones than have company cars.
Yet another issue is the prospect of some future administration “nominee [going] down for taking too many personal calls without giving the government its due.” This is a real possibility, considering the fact that so many people that are talented and intelligent enough to rise to the top levels of government already can’t seem to manage to do their personal taxes properly. Do you really think it’s wise to make the tax code even more complex?
UPDATE 06/16/2009: The AP reports that the IRS is quickly backtracking on its cell phone tax trial balloon, claiming now that they really want the tax repealed.