Proposals for Cutting the IRS Budget
by Linda beale
Proposals for Cutting the IRS Budget
As the budget battles loom again in our dysfunctional Congress, one of the targets of the right is, not unexpectedly, funding for the IRS. Sequestration is already hampering the IRS’s ability to perform its functions. See $6 collected for every $1. But the right wants to cut funding for the IRS to a mere three-fourths of its current level. See Rubin, GOP Proposes Reducing IRS Budget by 24%, Bloomberg, July 9, 2013, at Accounting Today.
It’s worth thinking about what this kind of budget reduction for the IRS–one of the biggest “too big to fail” financial institutions in the country–would mean. Remember that the IRS performs essential governmental functions–enforcing the tax laws and collecting necessary government revenues. In connection with these enforcement and collection functions, the IRS has implement a number of congressional policies (often with very little guidance) and, working with others in Treasury, provide guidance in the form of revenue rulings and regulations for many different types of taxpayers, as well as internal procedural guidelines for revenue officers. It has to determine eligibility of numerous organizations for the various “tax-exempt” categories Congress has created. It has to track information received from the myriad tax-reporting provisions. It has to ferret out tax scams and shelters invented by high-paid accountants and law firms and in-house counsel. It has to examine and audit and negotiated with taxpayers who are often better resourced and therefore able to “outgun” the agency. It has to provide information and testimony to Congress. It has to interact with tax lawyers in their professional organizations, such as the ABA Tax Section and the NYSBA Tax Section. And, to do its job decently well, it must spend considerable effort recruiting and training employees and overseeing them.
Much (if not all) of the problems pointed out (especially by the right-wing propaganda corps attempting to generate a “scandal”) about the IRS mismanagement of the thousands of 501(c)(4) applications it receives stems from under-resourcing of the agencies and the lack of skills training, computerized systems and solutions, and sufficient management personnel to ensure efficient and timely use of resources to target scrutiny to those organizations most likely to be in breach of requirements.
So one would think that the right response to the intense need for a good revenue collection and tax-law enforcement agency would be to increase resources rather than to cut them. But there is a significant portion of Congress people-especially in the House–that is not interested in ensuring that the government that they are a part of function properly and especially not interested in having the tax-collection-and-enforcement agency work properly. As James Maule put it on Mauled Again earlier this year in a discussion on IRS hearings:
[A]nother member of the panel tried to make the point that cutting IRS funding doesn’t necessarily mean revenue will decrease. He tried to make his argument by claiming that increasing IRS funding does not increase revenue. He asserted that funding for the IRS increased from 2001 to 2009 and yet revenue decreased during that period. No kidding. The revenue
decreased because in 2001 and again in 2003, the geniuses behind tax cuts succeeded in persuading the nation to accept a cut in its tax revenues at the same time it was pumping trillions of dollars into war expenditures. It was encouraging to hear another member of the party point out that the economic downturn also was a reason for the decrease in revenue collection. Yet it remains deeply disturbing that Americans have elected to Congress someone who thinks that sequestration of IRS funding won’t have an adverse impact on revenue.
The attempts to shrink the IRS is part of a larger, pervasive, foundational aspect of the anti-tax crowd’s plans to unchain themselves from any attempt on the part of anyone to get in their way as they exalt themselves at the expense of the society on which they are, no matter their denial, very dependent. I have explored the short-term foolishness of cutting IRS funding in posts such as Another Way to Cut Taxes: Hamstring the IRS. At a time when the Congress has piled dozens of new credits, deductions, and exclusions onto already complex tax law, has turned the IRS into the health care enforcer, and has required the IRS to serve as a collection agency for unpaid child support and other debts, it is absurd to cut IRS revenue collection efforts. When people defending the anti-government agenda claim to take their inspiration from the private sector, they conveniently ignore the fact that if a business wanted to eliminate its operating loss, the prognosis for success would be zero if the business ceased all advertising and left its cash registers and online payments systems unattended and unfunded.
So Cutting IRS Funding Won’t Reduce Revenues? Yeah, OK, Mauled Again (Apr. 1, 2013).
This idea of cutting the agency that is already so underresourced that it cannot fight the hired guns of the multinational corporations and Big Oil, Big Pharma, and other sophisticated big-monied taxpayers fits with the general corporatist approach of those on the right these days. It is an approach laden with anti-populist, pro-oligarchic, class warfare sentiment. It is the “meritocratic” notion that those who have most already should have even more because they “merit” it, while those who have less can be allowed to suffer their plight without any role of government to provide a safety net. It is the force that pays CEOs and other top managers and directors obscenely high salaries in bad times as well as good times, no matter what they do to create ruin for their communities and their employees and even their companies, under the false belief that the people at the helm are responsible for all productivity gains and none of the productivity losses of the firm. It is behind the effort to reduce pensions of already-retired union employees and the fight against unionization from wealthy interests (like the billionaire Walton heirs whose WalMart stores still refuse to pay a living wage). It is behind the decades of Reaganomics and Friedmania, two cult ideologies masquerading as economic theories that have wreaked havoc on the US economy and most especially on its middle class and poor. It has left one-fourth of American children living in poverty. It has created a country with untold wealth that won’t pay for decent public schools or decent public health care. It has privatized education to the point that poor school districts are forced to subsidize religious and other private schools while trying to maintain a decent quality of education in public schools for the not-wealthy children that remain in them. It has allowed Big Banks and Big Insurance companies to reap “rentier” profits from municipal necessities and personal health care needs, all in the name of claiming to support personal freedom. It is behind the GOP-driven refusal to support Detroit in Michigan where businesses and the wealthy get huge tax breaks, but the city on which the state depends for its future is treated as a misbehaving child, with its (mostly black) residents punished for the city’s exploitation by Big Banks and by corrupt leaders. This right-wing behemoth continues –with the aid of the so-called “centrist” Democrats–to paint Social Security and Medicare as too-generous “entitlements” whose benefits need to be pushed back to avoid the need to increase taxes to support them. This corporatist class warfare, in other words, is remaking the US economy into a have and have-not society that privileges the wealthy while peonizing everyone else. The push to defund the IRS is a useful piece of the class warfare battle gear for the right–by handicapping tax revenue collection and tax law enforcement, the right facilitates the wealthy elite and the multinational corporations they own and run in ripping off the nation and jeopardizing the lives and fortunes of the middle class and especially the working poor.
There is one bright spot in this budget debate–those Senate Democrats who are proposing an increase of about $26 million in IRS funding, in recognition of the great disadvantage in which the agency, with so many diverse tasks, is put by underfunding compared to the sophisticated taxpayers who are willing to aggressively push the boundaries of tax evasion. See several links, below.
cross posted with ataxingmatter
“Getting Rid of the IRS”–Detroit’s Nolan Finley’s wrong solution to the wrong problem
The Boom and Bust Cycle of Tax Shelters and Intimidation of the IRS