Two easy ways to avoid tax misinformation

In 2017 and again in 2021, Americans suffered the effects of deliberate lies about U.S. tax policy fed through news media and politicians. In contrast to well-vetted public process that led to the major Tax Reform Act of 1986, the current tax lawmaking process of our federal tax law is crude and largely based on misinformation. While qualified tax professional groups like ABA and AICPA continue their input in much the same manner as they did in 1986, their influence is drowned by larger mass media and well-organized political propaganda campaigns. Household media names like Bloomberg and Time magazine were even complicit in spreading recent tax misinformation. The misinformation was then amplified by social media and spread as the truth to the point where, in 2021, we even saw Continuing Professional Education (CPE) programs for tax professionals based on the perceived need to educate and spread information about tax changes that did not exist.

Since the 1980s, my practice has limited analysis and planning publications on tax topics to published law, rather than speculative pending law. Yet the amount of early misinformation causes me to venture into this area prematurely, even if just as an effort to avoid problems ahead.  There are two easy ways that each of us avoid tax misinformation:

  1. Rely on official legal publications. Use the actual law, not a third party’s commentary on the law, for assessment. When a third party’s analysis is useful, be aware of the peer review and editorial procedures of the publisher. If you aren’t familiar with this aspect, then don’t rely on it.
  2. Distinguish between administrative pronouncements and policymaking goals. Most official tax policy information comes from the U.S. Treasury. Yet not all information from the treasury is reliable fact. For example, the U.S. Treasury Department publishes a list of agenda goals that are a wish list of laws but have no current legal effect. These are not laws. The ABA and AICPA have been diligent in making objective forecasts on whether such goals are likely to become law. Other groups and persons making forecasts, sometimes referred to ‘pundits’, have not been objective. In contrast to the administrative goals as the government’s ‘wish list’, consider the quite different effect of official pronouncements. This week, for example, the Secretary of the Treasury issued a written directive to the IRS Commissioner about limiting the use of its audit resources to most Americans.

While nothing is certain in taxes except our inevitability of having to deal with them, we can greatly reduce our vulnerability to tax misinformation by being more vigilant and skeptical of our sources of information.