The IRS Finally Acknowledged that Racial Disparities in Taxpayer Audit Rates have Negatively Affected Black Taxpayers

From [HERE] The IRS finally acknowledged this month what Stanford’s Institute for Economic Policy research uncovered in 2023: Racial disparities in taxpayer audit rates have negatively affected Black taxpayers. The IRS has committed to reevaluating the mechanisms that caused the disparity and refining their compliance approaches—but tweaking the dials on the algorithm is insufficient.

We need true, fact-based accountability for why data-driven algorithms exhibited decidedly human biases in their outcomes. The tax system’s integrity depends on the IRS’s willingness to outline what went wrong and how taxpayers can be certain that the issue is resolved. Furthermore, open-sourcing the audit algorithms would provide both transparency and an opportunity to engage in a feedback loop with researchers and watchdog groups.

Biased Algorithms

Concern over racial disparities in IRS audits isn’t just about statistics. These disparities undermine how much taxpayers can trust the fairness of the tax system—especially if the IRS wants to foster voluntary compliance. Commissioner Danny Werfel has acknowledged that such disparities “degrade trust in our tax system,” and such degradation isn’t going to be improved with a mere assertion that the issue has been resolved.

Algorithms aren’t biased. But the people who write the algorithms—or the people who collect the data that the algorithms are applied to—may be. As artificial intelligence becomes increasingly popular for automating tasks and increasing operative efficiency, there are going to be more opportunities to scapegoat “the algorithm.” [MORE]