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Thursday, October 27, 2016

If the most frequently dialed federal agency in America can’t even answer two-thirds of the millions of phone calls it gets, should the government cut its budget?

Congress thinks so. That agency is the Internal Revenue Service (IRS). And lawmakers have hacked at its budget yet again.

Worse still, those cuts will cost more money than they’ll save. They’re basically “a tax cut to tax cheats,” said IRS commissioner John Koskinen.

Regardless of your feelings about the IRS, Koskinen is right.

The government has slashed the enforcement portion of the IRS budget by nearly 20 percent over the last five years. That’s forcing the IRS to shrink the number of employees working on enforcement by 15 percent.

Talk about being penny wise and pound foolish. For every dollar the IRS spent in 2013, it collected $255, according to National Taxpayer Advocate Nina Olson.

Imagine that someone told a CEO that a given department was bringing in hundreds of dollars to his company for every dollar it spent. “It is difficult to see how the CEO would keep his job if he chose not to provide the department with the funding it needed,” Olson said.

Yet, she noted, “that is essentially what has been happening with respect to IRS funding.” Congress has slashed the IRS budget four times in five years. And those cuts are feeding the budget deficit that conservatives supposedly fret about.

It’s all about political expedience. Remember when the IRS faced accusations of singling out conservative nonprofits for tax scrutiny? Along with other experts, I predicted that it would spur further IRS budget cuts. Now Republican lawmakers are taking their revenge.

It’s a vicious cycle. Critics attack the IRS for making mistakes, darkening the public’s view of it. That gives political opportunists a chance to lobby successfully for cuts. A smaller budget virtually guarantees future mistakes by a cash-strapped agency.

Taxpayer services are underfunded too. The IRS now is unlikely to answer even half the phone calls it gets from taxpayers, Olson says. The average wait time is 30 minutes.

So another vicious cycle plays out as taxpayers who try to do the right thing get frustrated. Evasion rates rise. Pressure on the IRS enforcement team mounts.

On top of all that, taxpayers and collectors alike are coping with a tax code that’s more complex than ever. The IRS is responsible for implementing about 40 new provisions of the Affordable Care Act alone, for example.

And it could get more absurd.

The Republican Party is fundraising on the promise of abolishing the IRS altogether, as Citizens for Tax Justice reports. What happens when a country can’t collect taxes?

“Italy and Greece have been stuck in vicious cycles in which tax evasion runs rampant,”Washington Post columnist Catherine Rampell recently wrote. So politicians “raise tax rates to extract more money from the few law-abiding saps still out there, encouraging people to hide economic activity from even higher tax rates, and so on.”

That kind of dysfunction hurts honest taxpayers and bankrupts governments.

Let’s change course before it’s too late.

Bob Lord, a veteran tax lawyer, practices and blogs in Phoenix, Arizona. He is an Institute for Policy Studies associate fellow.

Cross-posted from Other Words

Photo: 401(K)2013 via Flickr

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  • Mister Wirez

    Flat sales tax….
    Gimme my monayy

    • Insinnergy

      Grow up and educate yourself.

      • joe schmo

        Why? So he can find out how the Democrats cheat the taxpayer out of money to help them waste it on social causes and other insane ideology…. Better to keep honed in on that flat tax or consumption tax. This way we can eliminate the IRS and everyone has to pay. Wise man.

        • Bill Thompson

          The flat tax and flat sales tax will result in lower income people paying a higher per ratio percentage of their income than those at the top, it is the most regressive form of taxation. The conservative right are professionals at shooting themselves in the foot. Absolutely unbelievable!!

          • Quite believable Bill seeing as who is spouting such ignorance. The extreme conservative right’s intention isn’t to shoot themselves in the foot so long as their political ideals and weapons are aimed toward others.

        • Waste on social causes? 35 – 37 Billion dollars per year.. This helps to not only feed and house children, the poor and needy but to also insure these same ‘moochers’ won’t become so desperate that they’d rob, steal and kill YOU for a meal.. Waste on oil/gas subsidies? 180 BILLION dollars per year.. If not paid to these ‘elite’ they would be forced to use part of their record breaking PROFITS to continue operations. Compare the needs for what you define as… “Waste”. The overwhelming majority of needy would rather not be a ward of the state/g’ment and as for those who use the system for their own selfish ends (and this has always happened within all levels of classes) it should be handled and dispensed of lawfully by the same federal g’ment that YOU want to weaken and dispense of. I agree, we must eliminate waste but let’s be more than ‘selective’ about it. Both DEMS and PUBS cheat the taxpayer and this nation as a whole and to point fingers at one party or individual is petty and beyond short sighted. Romney said, “We need fresh blood in politics”.. I agree whole heartedly.. Fresh blood, not COLD blood.

  • Dominick Vila

    I suppose the tax exempt political organizations that were cheating (submitting applications for tax exempt status with false information) do not want to take chances in the future. Can’t think of a better way for cheaters to get away with their criminal activities than render government law enforcement incapable of performing its duties. The saddest part is that the overwhelming majority of Americans who do pay their taxes are being penalized by those who cheat the system, contribute to deficit spending and accumulation of debt, and are seldom caught.

  • Tony Torres

    The GOP and their voters seems to always vote against it’s their own well being.

  • Amused

    It is only a tax cut for Republican tax cheats,

    Obama has the Democratic tax cheats back since he entered office.

    That is why Al Sharpton is not in jail.

  • Ken from the Seacoast

    The reason the IRS receives so many phone calls is that the tax code is byzantine. Try reading instructions for the new healthcare exemption form 8965 I believe the entire tax code now runs around 75,000 pages. Politicians in both parties benefit from the byzantine nature of the code as it’s easy to bury favors and paybacks to special interest groups. The ONLY solution is to drastically simplify the tax code. A flat tax would be the simplest with the added benefit that politicians no longer get to tinker with tax code, to their benefit. As for harming earners on the lower end of the income spectrum, I believe that is untrue because there would be some poverty line, income below which would not be taxed. For example, an individuals first $20k in earnings so someone making 19k would pay no tax and someone making 21k would only pay tax on 1k of earnings. In principle I think a national sales tax is better than a tax on earnings (i.e. people’s sweat labor). It is again untrue that lower income individuals and families would be impacted the most because food and clothing (basic necessities) would be exempt. Where lower income individuals spend proportionally more of their income on basic necessities, they would not be paying sales tax disproportionally. I think the general publics resistance to a sales tax is that Congress doesn’t have the backbone to eliminate the income tax in lieu of a sales tax. Rather, we’d end up with both. And, where politicians lie, it would start out with a promise to never go above X%. Just like the original income tax was never supposed to go above 5%, politicians lie.

    • johninPCFL

      That works until the politicians’ owners make their “tweaks”. For instance, are Skittles exempt? Who says they’re not “food”? If so, how about Kopi Luwak coffee? Who decides which shoes are “clothing” and which are not (think: anything by Stuart Weitzman versus Chinese import.) Remember: millionaires can still take the “food and clothing” deductions.

      • Ken from the Seacoast

        I agree they’ll fiddle, and diddle. That’s what they do. It’s how they derive all of their power – manipulation of tax code – e.g payoffs to campaign donors and friends. What’s an approach to taxation that would discourage or prevent political fiddling and diddling? Whatever that is, I’ll support it.

  • bobsog

    There was NO Federal Income Tax prior to 1913. The country ran just fine without it for 137 years.
    Right now between Federal, State, and Local Income Taxes, I am handing over 50% of my income (or should I say being robbed of). Oh and thanks to the “Affordable Health Care Act” (yet another tax), my Health Insurance premiums have almost tripled.
    Yet over half of Americans currently pay 0 income tax and now a number of them don’t even have to pay for Health Insurance. How fair is that? I think it’s time that these people at least pay something…

    • johninPCFL

      The country had NO standing army, a Navy 1/10 the current size, and no foreign deployments in 1913, but it had debts that had carried forward FROM THE CIVIL WAR.
      The 47% that pay no taxes (as so often quoted) contain folks who have DEDUCTIONS for things like using their life’s savings to START A BUSINESS (which Romney didn’t do with his millions.) It also includes thousands of MILLIONAIRES who pay no taxes for the same reason.
      My health insurance premiums also tripled from 2006 to 2009, before ACA was passed. In 2010, I changed my policy (and kept my doctor) and reduced my premiums by a third (without a subsidy) when new insurance companies began selling in my state. Quit whining and go look for a better policy.

    • @bobsog:disqus .. “There was NO Federal Income Tax prior to 1913. The country ran just fine without it for 137 years ”
      … WRONG!! Along with FED taxes on imports (“tariffs”), whiskey, and (for a while) on glass windows. States and localities collected poll taxes on voters and property taxes on land and commercial buildings. There were also state and federal excise taxes. The United States imposed income taxes briefly during the Civil War and the 1890s, THEN on a permanent basis from 1913 and soon after that the nation began to progress..

    • Faraday_Cat

      Even if that were true (see Jmz’s response below), you don’t think we would still have needed to add a government agency after adding 220 MILLION citizens since 1913?
      I also highly doubt that, comparing apples to apples, your insurance premiums have tripled…maybe if you had one of those junk plans that didn’t actually cover anything and now you have one that covers the minimums laid out in the ACA, then I could see that kind of increase…but you got a real deal on an increase in what was covered, too.
      And lastly, let’s talk about what’s “fair” as far as taxes go…when the top 5% of the population rakes in nearly 62% of the nation’s wealth, doesn’t make sense that they pay at least 62% of the tax burden? More than that, shouldn’t corporations making record profits have to “at least pay something”, as opposed to, for example, GE…who got a REFUND in 2012 after having a banner year for profits (next time you hit a pothole in the road, just think, that could have been fixed if we hadn’t paid GE to make and keep profits from the government)? Really, unless you are a Romney type, you should be arguing the exact opposite.

  • HoratiusZappa

    It was stupid to politicize an agency, and more stupid to allow the politicization to go under-investigated and under-punished. For something to be revenge (reaction) implies a preceding action.

    Are you going to call for the IRS to be swept with a stiff broom and a no-holds-barred revelation of every related communication? No? Then bear the consequences.

  • Whatmeworry

    Congress hasn’t cut 1 nickel from enforcement that’s Barak and Koskins call

    • Daniel Max Ketter

      Huh? The only tax cheats are the military with their taxpayer funded golden parachute pensions and salaries, and that little teabagger weasel rancher in Nevada who refuses to pay taxes.

      • dpaano

        Excuse me….I’m a military veteran (23 years), and I don’t get a “golden parachute” pension nor did I get a very large salary while I was out fighting during the Vietnam war! Not sure where you get your ridiculous information! As for the weasal rancher, have to agree with you on that one. However, because the IRS has been cut so severely, we don’t have the ways or means to go after the weasal… he persists on grazing his cattle on taxpayer land without having to pay a red cent! As I said, the GOP hasn’t had a logical idea in years….why should they have one now?

        • Daniel Max Ketter

          Well, I’m a vet too. 3 years in the Air Guard and retired as a Colonel in CAP. My pension for my services was nutting

  • Whatmeworry

    Congress hasn’t cut 1 nickel from enforcement that’s not Barak and Koskins call

  • dpaano

    When are the GOP going to realize that this country, including their paychecks, run on taxpayer money? If they cut the IRS so that it can’t go after those tax frauds who cheat EVERYONE out of their money, then that means less tax money coming in. With less tax money coming in; there’s less to spend on other programs. Cutting the IRS makes absolutely NO sense whatsoever…..but, then again, when has the GOP ever been logical? Their ignorance is stunning at best!