Tax Analysts Blog

Stop Beating on the IRS

Posted on Jan 13, 2014
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.

Read Comments (7)

edmund dantesJan 13, 2014

You have ignored the fact that the IRS became an arm of the Obama re-election
campaign, and that its influence was sufficient for respected columnists to
assert that its illegal actions may have changed the outcome of the election.

What's more, they plan to double down on going after conservative groups this
year! The IRS has done nothing but stonewall--people have claimed the Fifth
without any repercussions at all. There are many additional examples of people
who spoke out against the Administration who got IRS audit notices the
following week. Just coincidence? Don't make me laugh.

I'm sorry that the IRS has done nothing to regain my trust or respect. But
they haven't, and your observations seem to be disconnected from that reality.
We cannot have a politicized IRS, which is what we have today.

Until there is a thorough housecleaning, until there is proof that all the
politics has been excised, I favor reducing the funding of IRS drastically.

bubba shawnJan 13, 2014

"Customer Service"? Even at a $12 Billion budget the Taxpayer Advocate
Congressional Reports cite terrible customer service every single year.

No politician has lost an election because they beat up on the IRS. But the
IRS decision makers combined with an institutional "need to know" culture sets
up that organization's environment that fosters unethical people with
temptations to squander taxpayer money and trust.

The root cause of all those problems is the IRS Chief Counsel's fanatical
application of Section 6103 on every question taxpayers ask.

Sunshine cures.

edmund dantesJan 13, 2014

Here's a useful update on the FBI's decision that there will be no criminal
charges over the targeting:

Can Lois Lerner testify now, given that she's been cleared of criminal
wrongdoing? No? Why not? Why should I trust the IRS now? Because the new budget
bill says that they have to respect the First Amendment? Why didn't they have
to respect it before?

I believe that if these clear abuses happened under Bush and were aimed at
moveon.org or the Sierra Club, the press would sing a far different tune. The
politicization and stonewalling are intolerable, and there is no mechanism
available to get the attention of IRS other than slashing their budget.
Crocodile tears about the impact this might have on tax collections have become
irrelevant to the resolution of these critical issues.

I agree that sunlight is the answer. Budget cutting is the only way to get
there.

edmund dantesJan 14, 2014

Absolutely correct, bubba shawn, excellent point. Here's more on the timeline
of the politicization:

I realize that Tax Notes is supposed to be about taxes, not politics. I wish it
could stay that way, but it looks like these abuses won't be addressed until
after 2016. Perhaps if their budget is reduced the IRS personnel will bring
their focus back to collecting taxes and do politics on their own time.

bob kammanJan 14, 2014

Everyone talks about IRS scandals, no one talks about Navy scandals. The US
spends more on its military than all other countries in the world combined, but
it doesn't spend more on its tax administration system per capita than, for
example, Canada. Let's cut the military budget by a third, and maybe those
fatcat Navy contractors and the officers they pay off will find new jobs,
sailing around Caribbean tax shelters to avoid enhanced IRS enforcement.

bubba shawnJan 15, 2014

What the FBI is ignoring are the facts that IRS employees disclosed 6103
protected taxpayer information to Federal Election Commission employees who are
not authorized to see that information. That is a felony that should at least
disbar Ms. Lerner and others who are implicated.

The FBI looks to be involved in a cover-up to protect the President. That kind
of thinking is reinforced by the President recently appointing Senator Baucus
Ambassador to China in the middle of the Senate Finance Committee investigation
on the IRS EO scandal.

Remember that in Washington D.C. there are no coincidences and all that happens
is for a political reason.

marc medlerJan 24, 2014

Thanks for pointing out that positive and constructive analysis is better than
rock throwing.
Another agency that is kicked like an old back fence is the post office- it
does a terrific job! Oh and what about the folks that keep the water clean and
the food safe-

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