December 22, 2014

Cutting IRS Enforcement Would Increase Deficits

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...

The House recently passed a short-sighted measure that would cut the 2015 enforcement budget for the Internal Revenue Service (IRS) by 25 percent.

Republicans say they are punishing the IRS for its poor response to recent scandals. But this would amount to the government shooting itself in the foot; the cuts could increase the federal deficit and diminish funding for other federal programs.

That’s because reduced enforcement will mean more tax cheating and lost federal revenue. The IRS estimates that the government takes in $4 for every dollar spent on enforcement.

The agency’s most recent figures indicate the 2006 “tax gap” -- tax liabilities that were not paid on time -- totaled $450 billion, with a taxpayer compliance rate of 83.1 percent. Enforcement efforts and late payments subsequently brought in $65 billion.

It should also be noted that IRS funding already appears inadequate in other areas. In her last annual report, National Taxpayer Advocate Nina E. Olson said the IRS can only answer 61 percent of its customer service calls.

Congress needs to deal with the problems at the IRS without encouraging tax cheats and raising the deficit.