Nominees' tax problems could prompt more people to cheat

— -- The high-profile tax missteps of three of the Obama administration's key nominees could make it more difficult for the IRS to enforce the law, tax preparers and academicians say.

Numerous studies have shown that taxpayers are less likely to comply with the law if they believe other taxpayers are cheating, says Jason Mazzone, associate professor of law at Brooklyn Law School. "Taxpayers don't like to be suckers," he says.

On Tuesday, tax problems derailed the nominations of former Senate majority leader Tom Daschle for secretary of Health and Human Services, and Nancy Killefer as the government's chief performance officer. Earlier, Treasury Secretary Timothy Geithner's nomination was delayed by revelations that he had failed to pay self-employment taxes.

"I think a number of Americans will take a look at this and say, 'If they're getting away with it, why shouldn't I?' " says Scott Sandstrom, associate professor of accounting at the College of the Holy Cross in Worcester, Mass.

Americans are among the most law-abiding taxpayers in the world, in part because the IRS uses computer matching programs that make it difficult to cheat, says Walter Pagano, a former IRS agent who is a partner at accounting firm Eisner.

According to a new survey by the IRS Oversight Board, 89% of Americans believe it's unacceptable to cheat on taxes.

Still, the IRS estimates that $300 billion in taxes owed goes uncollected every year.

James Maule, professor of law at Villanova University and author of the tax blog MauledAgain, argues that the complexity of the tax code has made it increasingly difficult for taxpayers to do the right thing.

"For every person who sits down and says, 'I'm going to deliberately cheat,' there are 10, 20 or 30 people who want to comply, and they end up not doing it correctly," he says.

Maule's solution: require lawmakers to prepare their own tax returns. "Congress doesn't understand what they've created because they don't deal with it."

IRS officials declined to comment for this story.