Imagine investing $80 over a decade and getting a $180 return. Pretty good deal, right? Now multiply those figures by a billion dollars and you get an idea of how much American citizens will benefit from additional federal funds being allocated to the Internal Revenue Service.
The agency responsible for collecting federal taxes earlier this month revealed how it plans to spend new money from the Inflation Reduction Act, a sweeping bill that Democrats pushed through in 2022. Republicans who opposed the bill have saved some of their harshest criticism for the part that restores IRS funding, which the GOP has worked hard to strip over the years.
Critics on the right say that starving the IRS protects citizens from an overreaching bureaucracy. They also claim the IRS has targeted conservative donors and organizations over liberal ones, a familiar topic in far-right media. It’s not unusual to hear calls for abolishing the agency entirely, as when Republican Sen. Ted Cruz of Texas campaigned on that idea when he ran for president in 2016.
The misuse of government power and the rise in the number of bureaucrats impinging on the freedoms of Americans are both serious issues, and the IRS has hurt itself over the years with ham-handed tactics and poor communication. Yet one of the most serious claims of bias was put to rest in 2017, via an exhaustive Treasury Department report.
Starting almost 20 years ago, the IRS hunted for nonprofit advocacy groups that were abusing their tax-exempt status by screening for politically charged names such as “Tea Party” and “Progressive.” That approach gave the impression the IRS was acting in a partisan fashion. But the report debunked claims that agents exclusively targeted conservative groups. And the IRS was right to ensure that nonprofit publications and groups, a sector that enjoys generous concessions, were playing by the rules.
Still, the truth hardly mattered since the idea of federal bureaucrats attacking conservatives had become a populist talking point. As Democrats pressed for IRS funding last year, Republicans conjured up an image of a supersized tax collector going “beast mode” on everyday Americans exercising their political rights.
We understand the IRS is no one’s favorite agency, especially during tax season. Still, gutting it over the past decade has cost the country megabucks and encouraged illegal conduct. Keeping the IRS weak and inefficient, as it is today, benefits no one except those who want to cheat on their taxes.
With a head count of 80,000 as of 2022, the agency had about 20% fewer employees than in 2010, including fewer auditors, who are tough to hire and retain. The lack of resources meant that its computer systems were practically left to rot. At the same time, the U.S. population increased by more than 24 million, and the tax code became even more complicated.
As a result, a process that should be getting more efficient thanks to automation, digital technology and data analytics is instead bogged down. Tax filings get backlogged, refunds delayed and taxpayers who call the agency wait forever for responses from overstretched staffers, who in the last fiscal year managed to answer only 17% of incoming calls. That meant millions of hardworking Americans couldn’t get information they needed to meet their tax obligations.
Worst of all from a financial standpoint, audit rates have plunged, and the deterrent effect is almost nonexistent among those who have the most to hide.
Some wealthy taxpayers, companies and partnerships have taken advantage of an outgunned agency by making greater use of hard-to-penetrate corporate structures to evade taxes. Without new investment in the IRS, the gap between taxes owed and what’s actually paid would grow to an estimated $7 trillion over the next decade, with the very top fraction of American earners accounting for a disproportionate share of that lost revenue.
Even with the increased funding approved last year, the IRS still will be operating at a disadvantage, but less so than today. The $80 billion investment between 2022 and 2031 will increase revenues by approximately $180 billion, according to the Congressional Budget Office. Plus, service levels will improve.
The politicization of the IRS, however, will continue.
While the GOP demonizes the agency, Democrats have made politically motivated decisions to direct increased enforcement at taxpayers reporting annual incomes of $400,000 or more. In discussing their plans for restoring the agency, President Joe Biden, Treasury Secretary Janet Yellen and other Democrats sure make it sound like those earning $399,000 or less should get a pass.
That’s downright un-American, and counterproductive since revenue projections show some taxpayers below that arbitrary threshold also fail to pay what they owe.
It’s obvious the IRS needs the wherewithal to pursue bigger enforcement cases, as that’s increasingly where the money is. But there is no good reason to divert it from its mission of enforcing the tax code across the board. Each year, millions of Americans never even file their federal tax returns — which, by the way, are due this year on Tuesday, April 18. Those scofflaws should be easy to identify with upgraded systems, and the IRS needs to go after them, too.
It is not fair for honest taxpayers to bear the burden of our nation’s defense, health care, law enforcement and other essential government functions while many of their fellow citizens, of all income levels, shirk that responsibility with impunity.
For the sake of fairness and that all-important trust in government, America needs a better IRS, and it won’t happen without sustained investment.
