Ah, but, it is possible to call the national tax hotline and find out exactly how much income has been reported in connection with you via W-2s and 1099s. In fact, many people who don't keep good records have to do this every year just to find out how to start calculating their AGI.

It's a rather obscure feature, but it can be done.

But this is just for things like W2s and 1099s. When the party providing you income (employer, bank, etc.) sends one to the IRS they also send a copy to you. Only idiots try to cheat the IRS by lying about what these forms say. This isn't to say it doesn't work some of them time (I forgot to report the redemption of a bond once and never heard about it, but I'm poor.) But I have a hard time believing this makes up a significant fraction of the total revenue lost to tax fraud. If people get away with it that's probably because the IRS have bigger fish to fry among all the money changing hands that isn't reported on such forms.

Anyway, this is not how law and order is supposed to work in a civilized society. You don't bait morons into breaking the law by fooling them into thinking they won't get caught. For every potential cheat who looks at this info and says "Aha! They don't know about the dividends from my Acme shares! Cha-ching!" there are probably more who will be dissuaded from cheating because they'll realize that, oh yeah, my bank sent a copy to the IRS as well. Or better yet, people will be prevented from _accidentally_ omitting income and having to go through an audit, which is a net win. (I sure as hell would have reported that bond.)

Not really - it's only easier to catch people that try to hide things that the IRS already knows. Nobody that was actually trying to cheat would ever do this if the IRS was up-front about what it knew going in.

What might happen more is that people don't correct the IRS's assumptions when they miss something and it's in their favor (accidentally or not). Whether or not this would significantly affect the bottom line, I have no idea, but I'd consider it vastly preferable to have them put more resources towards research before people are accused of cheating than to spend on enforcement after the fact.

Yep. The government showing its hand creates information asymmetry; the citizen then knows which assets and income to declare, and which ones to keep off the books.

And also, they're can use the list of "liars" as a sieve and focus their investigative efforts on those, instead of the docile, ball-playing masses.