Since a budget squeeze seven years ago, the Internal Revenue Service increasingly has relied on data analytics to meet its growing responsibilities. Drawing on large datasets and social media, the agency touts its advanced analytics program as helping to recover millions of dollars lost to tax fraud and errors.
However, the use of this data is a direct violation of our privacy rights, breaching several federal statutes designed to prevent government intrusion — something the IRS fails to acknowledge and disclose. We need to bring our laws up to speed with our technology, in order increase accountability, transparency and oversight — bringing the IRS in line with American values of privacy and due process.
{mosads}According to information obtained by the American Civil Liberties Union, the IRS has violated the Electronic Communications Privacy Act and legal precedent by obtaining electronic communications without a warrant. This practice, authorized in the IRS audit manual, contradicts the 2010 U.S. v. Warshak ruling, which reaffirmed citizens have a reasonable expectation of privacy in their emails, and the government needs a warrant to obtain them. The IRS agreed in a Senate hearing to cease reviewing emails but said nothing about texts and social media.
Taxpayers are largely oblivious to the ability of institutions such as the IRS to peer into our lives without our knowledge or permission. Two decades after the internet arrived in force on our desktops, and a decade after the arrival of the smartphone, most people are unaware of the IRS’s activities.
People post on social media sites, enter their credit card information online, and routinely answer questions to get to the page they seek without understanding the terms of use and privacy policies that govern such activities.
What rules we do have clearly are intended to protect our privacy. The Privacy Act of 1974, for example, requires government agencies to comply with fair information practices. At a minimum, the law mandates that citizens be informed when the government collects data on them and that they should be given the chance to review and correct the information.
When he introduced the act, U.S. Sen. Sam Ervin said, “The appetite of government and private organizations for information about individuals threatens to usurp the right to privacy, which I have long felt to be among the most basic of our civil liberties as a free people.” At the time, a five-ton supercomputer had 1/1,000th the computing power of an iPhone. Even then, Ervin worried that computers facilitated a “thousand-fold increase in the ability of the government to store and disseminate information” on individuals.
The IRS’s computer power is now measured in petabytes — quadrillions of bits of information. Its predictive algorithms can audit, track and analyze the internet lives of most every taxpayer. Like so much mislabeled junk mail, this data easily could be flawed. According to my research, published in the Vanderbilt Journal of Entertainment and Technology Law, the algorithms could be extrapolating from false assumptions to discriminate against entire groups of people.
The service rarely discusses this. Its Analytics Department is buried in the IRS web pages. It safeguards its own privacy by claiming that revealing its analytics program and algorithms will help tax cheats game the system or undermine law enforcement. The agency should be transparent about what types of information it collects, and give taxpayers a chance to review and correct errors — federal law states this.
At a minimum, Congress can do a better job of getting up to speed on technology and its power to undermine our democratic values. Laws that were created prior to the internet and social media need to be updated. We need some sort of independent review body that can investigate, monitor and ensure that the IRS’s analytics program not only complies with the letter but also the spirit of privacy law.
We need a tax agency that operates more in the spirit of government by and for the people, not against them. Surely, we can do better.
Kim Houser is a clinical assistant professor of business law at Washington State University Carson College of Business.