Revisiting the IRS
Taxes are what we pay for civilized society.
— Oliver Wendell Holmes, Jr. Compania de Tobacos v. Collector
The Republicans deserve credit for persistence, if not creativity. First it was the Affordable Health Care Act that they have voted to repeal no fewer than 54 times since taking control of the House in 2011. Now it is, once again, the Internal Revenue Service they have in their sights.
Attacks on the IRS over the years have been less frequent but far more effective. In 2004 the American Jobs Creation Act of 2004 became the law. One of the purposes of the Act was to transfer to the private sector jobs that had theretofore been done by the public sector i.e. the government. The Republican reasoning behind this move was that whatever the public sector can do, the private sector can do better, if given the chance. Once the act was in place the Republicans has a chance to test it out in real life situations. Accordingly, beginning in 2006 and, following Congressional instructions, the IRS farmed out delinquent tax collecting to three private companies, two of which were especially well qualified to receive the contracts since they had contributed significant amounts to the coffers of the politicians who had a hand in hiring them.
According to a report in the Washington Post, the goal of the program was to collect $1.4 billion from deadbeats who owed the IRS $25,000 or less. If the private debt collectors met the target they would be entitled to keep $330 million. Even though the private sector is better at an assigned task than the public sector, the debt collectors missed their goals. Instead of collecting $1.4 billion, the assigned amount, they collected only $49 million thus missing the goal by $900,551,000. Commenting on the program in a statement on the floor of the Senate, Senator Ben Cardin of Maryland reminded his colleagues that Nina Olson had earlier informed his colleagues that if the IRS had spent the $7.65 million it cost to implement the private debt collection on an automated collection system, it would have generated generate $153 million. His Republican colleague in the House, Jim Ramstead, was not daunted by the failure of the program. He said: “the real choice is whether we use private collection agencies or let these tax debts go uncollected. I hope we don’t take an enormous step backward in our efforts to close the tax gap by eliminating a program that’s working.” How a program that missed its goal by almost $1 billion is considered working is better explained by a Congressional Republican than by me. In 2008 Democrats took control of both Houses of Congress and in 2009 tax collection was returned to the IRS. That was shortly before Congress began cutting the IRS funding.
In fiscal year 2010 the IRS received $12.15 billion in funding, $4.5 million less than the $12.6 billion it had requested. The reduced amount was insisted on by Republicans even though the Treasury Secretary and the IRS commission had pointed out to Congress that increased funding for the IRS pays for itself. According to the Treasury Secretary at the time: “Every dollar invested in IRS yields nearly five dollars in increased revenue from non-compliant taxpayers.” The Republican were unpersuaded then and remain so now. In the 2015 budget agreed to by the House and Senate in December 2014, the IRS will get $10.9 billion, a decrease of 10% since 2010. The 2015 budget for the IRS is about the same as what it was in 1998 when 30 million fewer returns were being filed by taxpayers. Nina E. Olson, leader of the Taxpayer Advocate Service anticipates that in 2015 the IRS will only be able to answer 43 percent of the 110 million calls it expects to receive. Those lucky enough to get through will be on hold for 30 minutes. If the wait is any longer than that the taxpayer will be treated to what is described as a “courtesy disconnect.” The caller is removed from the cue waiting to speak to a representative and disconnected. The caller can, of course, call back in order to be placed back in the cue. In 2013, 61 percent of calls received were answered and the wait time was 18 minutes.
According to the Taxpayer Advocate Service’s 2013 Annual Report to Congress, the IRS has almost 400 walk-in sites. Ten years ago it answered more than 1.4 million tax-law questions at those locations. Because of the most recent cuts some of those sites may close and those remaining open will only answer “basic” questions during tax season and none after April 15th even if a taxpayer has not yet filed. The agency will no longer prepare returns for low income, elderly and disabled taxpayers. Its workforce was reduced from 95,000 full-time employees in FY 2010 to 87,000 in FY 2013 as a result of earlier cuts and it is anticipated that in 2015 another 3000 positions will be eliminated.
The successful attack on the IRS and the prospect of more attacks on other valuable institutions by newly emboldened Republicans lead one to hope that more votes are scheduled on repeal of the Affordable Health Care Act. Those are the sorts of harmless actions that satisfy the need of Republicans to let everyone know how much they dislike the president without inflicting harm on the country.