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I Love the IRS
Years ago I did a book on tax enforcement at the Internal Revenue Service. (I don’t get any royalties from sales, FYI.) The IRS has been under legislative attack for decades. The major assault was in 1997. Underfunding inhibits enforcement of existing law and costs more in lost or delayed revenue than it saves. That’s why spending more on the IRS reduces the deficit, if you care about the deficit. (I don’t, but I do care that taxes are paid in full and on time.)
Decades ago I complained that in budget ‘scoring,’ additional funding for the IRS was not counted as a deficit reduction measure. I was assured by some famous economists, including the since even more famous part-time comedian Austan Goolsbee, that such calculations were too difficult. Now they have become commonplace.
The latest foray from our insane, new Speaker of the House, has provoked cries of tax relief for billionaires. I’ll pass on the political utility of that mantra. As far as the facts, go, it’s bullshit.
As the IRS “tax gap” data attest, revenue loss or delay (a dollar in tax owed but delayed in payment costs the government money) is widespread, well beyond billionaires.
The implied breaks for billionaires are of course grating and a politically potent complaint. The way that works, incidentally, is that when a rich person or corporation is found to be delinquent, prosecution is so expensive for the IRS that it seeks compromise with the offending party. The agency typically finds itself legally outgunned, not because its attorneys lack expertise, but because there aren’t enough of them and they lack the luxury of time. The wealthy can tie up the agency indefinitely. If a final resolution is achieved, it’s just another business expense. There are no further legal repercussions. There are also all manner of smaller fry who fail to pay what they owe on time, or at all.
The MAGA-fools screaming about thousands of revenooer agents breaking down doors is nonsense as well. They want to defund the tax police. But most of any funding increase will not go to hard-edged enforcement. The IRS needs people just to process returns and refunds in a timely manner and to answer questions on the phone. Enforcement resources are much the smaller end of the egg.
Usually, the first step in enforcement is what’s called a “correspondence audit.” This is a letter the agency will send you if they find any discrepancy between what you have paid and what it thinks you owe. It’s usually resolved when you pay up, no questions asked, perhaps with a penalty for delay, and that’s the end of it. Or if you dispute the request, you can appeal. That entails more rigamarole, of course, but it’s up to you.
Starvation of the IRS is of a piece with long-standing shrinking of the Federal civil service, outside of defense. It’s why your requests for student loan relief or help with retirement benefits are referred to opaque web sites. It’s why you have to stay on hold for hours whenever you need to speak to a Federal government person, if their robot answer gadget is unhelpful or uncomprehending, which is often. It’s why the initial rollout of ObamaCare was a debacle, with enduring political effects.
As the numbers go, support for Federal employees is a small portion of the Federal budget, compared to benefit payments and defense spending. It’s not visible until you need it.