Tax Analysts has been suing the IRS and pestering its leaders with pointed inquiries for four decades. Our goal has been to get more accountability and disclosure from the IRS. So I have no problem with any tough scrutiny and criticism of a powerful agency that has the potential to do much harm. Despite that it is hard for me to see how the recent escalation of attacks on the IRS will do anything to improve tax administration. On the contrary, it will only make the mess worse.
The administration has proposed increasing the IRS budget of approximately $12 billion by $1 billion. House Republicans want to reduce it by $3 billion. They are mad as hell about the IRS's treatment of conservative organizations that applied for 501(c)(3) and 501(c)(4) status. They believe it should be punished. They also believe it is wasting money. They cite the fact that the IRS is paying bonuses to employees. Even better, they have a video of IRS personnel line dancing at a training conference in California.
Specific problems and issues at the IRS should be addressed with targeted solutions. Of course, the IRS, like any large bureaucracy, has maddening inefficiency, personnel problems, and wasteful spending. But condemning the whole agency for those particular problems is not only unfair, it's lousy management. Just as we shouldn't throw money at a problem, we should not suppose meat-ax budget cuts will solve the problem either.
Losing one-quarter of its budget would certainly force the IRS to be more efficient. But Republicans are fooling themselves if they believe it won't also reduce desperately needed customer service and enforcement. It is generally believed that for every dollar the IRS spends on enforcement, it gains $4 of additional revenue. So it is likely that IRS budget cuts will ultimately add to our budget problems.
The other problem with the recent escalation of attacks on the IRS is what it has done to the agency's reputation. Who cares, you may say. Well, no matter what you may think of the IRS and no matter how much it may deserve criticism, the IRS like any organization, including private businesses, desperately needs to maintain its public image. This is critical for hiring top personnel. For the IRS it is particularly important because government salaries for tax experts are not even close to being competitive with the private sector. Reputation is also important to the IRS because it is so critically dependent on taxpayers’ voluntary compliance. If members of the public don't respect it, some may be less inclined to pay Uncle Sam what is due.
It is, of course, great politics to beat on the agency that everybody loves to hate. There is a part of all of us that wishes the IRS would disappear, or maybe just become so feeble that it becomes impossible for it to catch us making mistakes. But these are irrational thoughts, and no responsible legislator should seriously encourage them. If Congress wants lower taxes and a simpler tax code, it should legislate to those ends. But once it has decided on what the law should be--like it or not--we need an agency that enforces the law fairly. Instead of scoring easy political points with budget cuts and endless public castigation, Congress should roll up its sleeves and start thinking of ways to help the IRS achieve its mission.
Tax Analysts Blog
Stop Beating on the IRS
Posted on Jan 13, 2014