United We Stand, Divided We Fall

Before the FY 2014 IRS budget was cut by $526 million from the FY 2013 level, the National Taxpayer Advocate, Ms. Nina E. Olson, published her annual report to Congress and pleaded the case for additional IRS dollars not less. The IRS budget is now at the FY2008 level. The cuts to the IRS budget since FY 2011 have been over $1 billion. This is a national tragedy and adds further to our national deficit and debt. Ms. Olsen indicated to Congress that these combined cuts are ‘short sighed and counter-productive’ and will lead to less tax collections and less service to the public and its tax advisors. She indicated that ‘The IRS desperately needs more funding to serve taxpayers and increase voluntary compliance.’ Further, she noted that the IRS ‘had fewer employees than four years ago, but those who remain are less equipped to perform their jobs’ as both employee counts and training funding have decreased substantially. For every dollar spent on the IRS, the US Treasury receives between $7 and $10 of added revenue given various estimates of the return on these budget dollars. A tough minded business person would keep spending on the IRS until the economic return was $1 of IRS costs versus $1 of additional revenue. We are a far cry from that figure.
We recommend adding $5 billion to the IRS budget for FY 2014. $1 billion will be used to restore the cuts to the IRS budget since FY 2011. The other $4 billion will be used, as we have discussed before, for additional audits and other collection activities designed to shrink our $450 billion tax gap to a more reasonable level as well as to counter the exploding refund fraud from gangsters and other thieves. These added funds will cut the current federal deficit by 33% to 67% depending on the results. The President and the Congress should act immediately. Time is money and time is running out.
Harry Pukay-Martin