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Slashing the IRS budget is penny-wise and pound-foolish

Reduced funding harms ordinary taxpayers and makes the agency less effective.

By MSN Money producer Jan 17, 2014 3:54PM

By Bruce Bartlett, The Fiscal Times The Fiscal Times


There is an old trick in both government and business to get rid of an operation you don't like through stealth -- you simply cut its budget gradually, thus causing its effectiveness to suffer, and then cut it some more because it is ineffective.

The exterior of the Internal Revenue Service building in Washington, D.C. (Susan Walsh/AP)

Repeat until the operation is so weak and can be abolished altogether.


Republicans have been playing this trick with the Internal Revenue Service for years. The agency has become the all-purpose whipping boy to excite Tea Party members and divert attention from the performance problems resulting directly from Congress's failure to fund it properly.


The Obama administration has stood by passively, doing nothing whatsoever to counter Republican attacks.


The problems at the IRS will only get worse; the new budget gives it $526 million less than it got in 2013, which was cut from what it got in 2012, which was cut from what it got in 2011. And these are dollar cuts; in inflation-adjusted terms the budget reduction is even greater.


The IRS Oversight Board has repeatedly criticized Congress for failing to provide the IRS with adequate resources to do its job.


The following graph shows the recent trend.


Taxpayer satisfaction with the IRS -- Fiscal Times

Since the bulk of the IRS budget goes to personnel, budget cuts translate directly into fewer people working at the IRS. The number of positions peaked at 116,673 in 1992 -- after Republicans Ronald Reagan and George H.W. Bush supported steady increases from 86,156 positions in 1981 -- to just 87,032 in 2013.Fewer personnel necessarily mean that the IRS cannot respond to requests for information from taxpayers.


According to the Taxpayer Advocate's office, in 2013 the IRS was only able to answer 61 percent of taxpayer phone calls, down from 87 percent a decade ago, and the time people had to wait for a consultation rose from 2.6 minutes to 17.7 minutes.

IRS telephone service

Moreover, on those occasions when taxpayers can reach an IRS official, they are less and less likely to get an answer to their questions about the tax law. The number of tax law questions answered by Taxpayer Assistance Centers has fallen from 795,000 in 2004 to just 110,000 in 2013, according to U.S. Government Accountability reports. 


This poor performance results directly from a slashing of the IRS training budget from $172 million in 2010 to just $22 million in 2013. And this was during a period when the Affordable Care Act was being implemented, which added considerably to the IRS's responsibilities since much of it involves new tax credits and penalties. 


Not surprisingly, other indicators of IRS performance have also fallen, such as the number of audits and the amount of unpaid taxes collected.

IRS funding history -- The Fiscal Times

In the end, those who suffer most are average Americans who cannot afford expensive accountants or tax preparation software, and attempt to do their taxes honestly by themselves. Another cost, is encouraging tax evasion by otherwise honest people who feel less responsibility to be honest when the IRS doesn't take their calls or answer their legitimate questions adequately. 


Experience shows that once people begin to evade taxes it tends to multiply and continue indefinitely. No one likes to think they are a shmuck for paying what they owe when their friends and neighbors brag about making up phony deductions or hiding taxable income.


Eventually, the tax system will break down, as it has in many European countries, contributing heavily to the debt crisis in Greece and elsewhere. When people don't pay the taxes they owe, this forces the government to go into debt and raise taxes on honest taxpayers, which pushes more and more of them into the ranks of the tax evaders.

Another consequence is that governments must raise the sorts of taxes that are harder to avoid, which tend to be regressive sales taxes, while income taxes, which are fairer, go uncollected. Thus the overall tax system becomes less fair, which encourages further tax evasion.


No one likes paying taxes, but as Justice Oliver Wendell Holmes put it, they are what we pay for civilized society. Republican scapegoating of the IRS is reprehensible and ought to end.


More from The Fiscal Times:

VIDEO ON MSN MONEY

36Comments
Jan 17, 2014 5:39PM
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This is a crock of ***T! 

 

"Eventually, the tax system will break down, as it has in many European countries, contributing heavily to the debt crisis in Greece and elsewhere. When people don't pay the taxes they owe, this forces the government to go into debt and raise taxes on honest taxpayers, which pushes more and more of them into the ranks of the tax evaders." 

 

Love this quote above: - we are 17.5 TRILLION in Debt and this author is worried about a few cuts to the IRS - and it's the GOP's fault?????   OMG!!!!  Maybe the current administration should use the IRS for it's intended purpose, not to go after the administration's perceived enemies - i.e., Tea Party etc....

 

This isn't objective journalism, it's blatant liberal advertising!!!!

Jan 17, 2014 5:37PM
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The writer should have just said that he favors big(ger) government.

Propaganda...

"Hey unworthy commoners. You should all be glad that Big Brother is trying to shove his way or the highway down your throats."

Jan 17, 2014 6:46PM
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Why don't we just abolish the IRS and save the 13.3 Billion Dollars they use to collect our taxes and keep them from being used to target Obama's enemies. All we have to do is implement a FLAT CONSUMPTION TAX and a BALANCED BUDGET AMENDMENT to save the country. You wouldn't have to file a tax return, the politicians couldn't use the tax code to stuff their and their friends pockets, they would also not be able to use it to buy votes and everybody would pay their FAIR share, including ILLEGAL ALIENS and Tourists. It couldn't be any simpler people. You just have to start hammering the politicians, and if they don't listen, vote them out. 
Jan 17, 2014 6:27PM
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Maybe if the IRS was effective, didn't target certain groups, and stop letting all the fruad happen, the budget cuts wouldn't happen.
Jan 17, 2014 5:54PM
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i bet since irs jobs peaked in 1992 that their jobs have become more streamlined and efficient with the use of better computers and software.
Obama has sat around and done nothing?!? he's had his hands tied as dems in congress and irs were working together to sabotage political parties they didn't agree with.  It's hard to say we need to give irs more money when they are abusing their powers.

Jan 17, 2014 6:55PM
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Slashing the IRS budget is great!   That means less audits and harassment from seasonal and unqualified employees.
Jan 17, 2014 6:33PM
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Well, we know when they have to add the 15,000 IRS agents to track down the folks who have not applied for Obamacare that will increase their budget by about $1.5 Billion (conservative figure, guessing each agent will cost at least $100K annually in salary in benefits). 
Jan 17, 2014 7:25PM
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We already have problems with tax fraud, with millions of dollars going out the door to people who don't exist, or file fraudulently. And i's all courtesy of the poor performance of the IRS!

Now we've added the burden of yet another government-run program to the mix. Obamacare!

Who's bright idea was this in the first place?

Oh......., never mind.

Jan 17, 2014 6:18PM
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I am The Great And Powerful OZ!! Bow to ME! Pay no attention to that man behind the screen.
Jan 17, 2014 7:30PM
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If they have money for political hatchet jobs then they have too much and a drastic reduction is in order.

Jan 17, 2014 8:56PM
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The IRS is like our current administration, it has gotten such an inflated ego that it thinks it has unlimited power to do what it wants at will.  Maybe a few cutbacks will cause IRS employees to do the jobs they were hired for and won't have time to target and harass honest, law-abiding citizens.  Maybe if they can't afford to hire so many people, they can keep the ones who actually can do their jobs efficiently and effectively.  And, maybe along with reduction in funding, perhaps next we might see a reduction in non-sense tax laws.
Jan 17, 2014 7:42PM
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Oh no, does this mean Americans will stop getting fradulent tax bills for no reason that they cannot fight (because the IRS is a monster that cannot be reasoned with)? 
Jan 17, 2014 8:35PM
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SOLUTION: Flat Tax!

Or we get a flat tax on purchased items, or we get a Flat Tax taken out of EVERYONE's salary/earnings, be it a salary, dividends, gains, 1099 and maybe even Social Security and Welfare.

This way EVERYONE contributes, and even the ones who try to beat the system cannot!

For companies, create a percentage based on profits and take out major loopholes.

This way EVERYONE, people AND companies pay their share and all these non-sense laws and forms are abolished once and all!

About time to FLAT TAX!!!


Jan 17, 2014 7:37PM
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HOW EXPENSIVE IS TAX SOFTWARE? SOME ARE FREE!
Jan 17, 2014 7:17PM
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We are in debt because of both over spending AND diminished income from taxes.  If you want a balanced budget, you have to let your income equal your expenses.  Since Republicans don't want to pay taxes, you just let the income portion of the equation fade even while they increased the spending portion during the Bush years.  And they claim to be Fiscal Conservatives?
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