Saturday, January 21, 2006

Information Overload?

At what point does the government have too much personal information? Even if it has a legitimate use for the personal information, does the danger of allowing government officials to have the information at their fingertips outweigh these legitimate benefits? These questions are raised by the following story from Tax Analysts:
IRS Fleshes Out Data Warehouse Plans; Outsiders Raise Concerns

In a January 20 phone interview with Tax Analysts, IRS Electronic Tax Administration Director Bert DuMars dismissed privacy concerns while laying out the details of a potential IRS data warehouse.

DuMars told Tax Analysts that the IRS has already begun studying the costs and benefits associated with creating a central database. It would house taxpayer information from Form W-2 as well as the "families" of Forms 1098 and 1099. The "data warehouse" would serve as a single collection point for the forms and would be made available to other government entities such as the Social Security Administration and state agencies.

"We’re not the only ones who need this information," he said.

DuMars told Tax Analysts that a data warehouse would not tread on any section 6103 disclosure rules because it would be shared only with entities that already have access to the data.

"I don't see a problem with [disclosure]," he said. "That’s not what we're concerned about here."

DuMars said at least two benefits could result from creating a database. Putting all the information in one central place would save time and money for the IRS and other agencies by replacing myriad separate and convoluted information-sharing processes. It would also make the information readily available to taxpayers. According to DuMars, if the data warehouse had been in place when Hurricane Katrina hit, thousands of taxpayers who lost documents would now be able to retrieve their information.

Several former tax administrators contacted by Tax Analysts raised concerns about the prospect of an IRS data warehouse, arguing that it could put the IRS on a slippery slope.

"The more convenient the information is, the more risk there is of losing it -- because you make it available to more people," said former IRS Commissioner Sheldon Cohen.

Cohen and others said that while a database might start with a limited number of forms, it's a short leap from there to adding more documents and information.
Over time, like most Americans, I've gotten used to having information that used to be private or semi-private open to ready public inspection. That is, there was a great deal of material (e.g., the valuation of your home for property tax purposes, court records, etc.) that was always open to public inspection, but it used to take some degree of energy to seek out the information. Today, however, that information is frequently only a mouse click away.

The principle invoked by the IRS here is that the proposal does not increase the number of people or agencies that have access to the information. Instead, the database would simply make it easier for those who are already authorized to view the data to access it. The reason that the proposal is troubling is that the obvious increased efficiency in the ability to access the data can be used for ill as well as good.

The story is also covered by the Center for Tax Studies weblog, here.

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