IRS budget cuts lead to lower tax collections and poorer customer service

Joe Davidson
Columnist April 22, 2014

A new report documents the limits of doing more with less.

When number crunchers decide that budgets must be cut, managers tell their employees to provide the same or greater production with fewer people. That’s possible, but only to a point.

Joe Davidson writes the Federal Diary, a column about the federal workplace that celebrated its 80th birthday in November 2012. View Archive

The Government Accountability Office, in a study released Monday, demonstrates that the Internal Revenue Service is past that point. The title sums it up: “Absorbing Budget Cuts Has Resulted in Significant Staffing Declines and Uneven Performance.”

The GAO says the IRS has absorbed about $900 million in budget cuts since fiscal 2010, through reductions in personnel, less employee training and some efficiencies.

The bottom line — poorer service.

Since the GAO is an arm of Congress, perhaps Capitol Hill will essentially listen to itself when it looks for ways to save money. Cutting the IRS budget too far is like farmers withholding feed from cows and expecting them to get fat. Uncle Sam’s treasury suffers when his tax collectors don’t have the tools to do their jobs.

Here’s an example: The $500 million that the IRS lost because of automatic federal cuts, known as the “sequester,” last year led to a drop in tax revenue of more than $2 billion, IRS Commissioner John A. Koskinen said in an interview.

That means the IRS has a return on investment of $4 to $1 — for every $1 spent by the IRS, it puts $4 in Sam’s pocket.

Another example: IRS collections from enforcement actions are down $4.3 billion from four years ago, Koskinen recently told Congress. “This decline in audit revenue is attributable to a decline in the number of returns audited,” he said.

I wouldn’t wish an audit on anyone. But the decline in audits shows how cutting the IRS budget and staff goes well beyond forcing an agency to be more efficient. In this case, budget cuts aggravated the problem they were meant to solve — too little money to cover costs.

Koskinen told the Federal Diary that cuts have led to an “intolerable level of public service.” That includes the 15.4 million telephone calls from taxpayers that the GAO said went unanswered last year.

Who cares the most about taxpayer service? Employees, Koskinen said. The main complaint he gets from them is not enough staffing.

Budget cuts made the latest filing season tough on taxpayers “frustrated with long lines at walk-in assistance centers and on the telephone,” and that led to “instances of angry and irate taxpayers,” said National Treasury Employees Union President Colleen M. Kelley.

“Too often people think we can cut the budget . . . and it won’t really make a difference,” Koskinen said. But the “ramifications are significant.”

The average amount of time callers to the IRS had to wait for service in 2013 was 14 minutes, according to the GAO. That’s too long. It’s much worse than the nine minutes in 2009, yet better than the 16 minutes in 2012. About 67 percent of the callers seeking live assistance received it this fiscal year, but that means a third gave up.

That’s no way to run a business or a federal agency.

Training has taken a big hit, as we reported previously. Citing National Taxpayer Advocate figures, the GAO reported that per-employee spending on training dropped from $1,450 to less than $250 from 2009 through 2013.

“Newer employees feel they don’t have enough training to adequately deal with customer questions,” Koskinen said. “Not having enough training to feel comfortable has a negative impact on morale.”

So, when workers can answer the phone, will they be able to answer the questions? Most probably will. Too many might not. Employees who don’t know what to do or how to do it hurt productivity and that drives up costs.

Concluded Koskinen: “There’s a limit to what we can do.”

Charity rule ‘concerns’

A bipartisan group of House members has “substantial concerns” about new Obama administration regulations for the Combined Federal Campaign, the charitable-giving vehicle for the federal workforce.

Although they praised certain elements of the new rules for increasing transparency and accountability, the members said any changes should “not negatively impact the program’s ability to serve those in need in our communities.”

In a letter to Office of Management and Budget Director Sylvia Mathews Burwell, the Republicans and Democrats noted three points raised by charitable organizations: the non-refundable charity application fee, elimination of cash contributions and changes to charity support organizations.

The letter was sent by Reps. Darrell Issa (R-Calif.) and Elijah E. Cummings (Md.), chairman and ranking Democrat, respectively, on the Oversight and Government Reform Committee; Blake Farenthold (R-Tex.) and Stephen F. Lynch (Mass.), chairman and top Democrat on the federal workforce subcommittee; and Dave Reichert (R-Wash.), a member of the Ways and Means Committee.

The letter was dated the same day a Federal Diary column was published about complaints that charities have about major portions of the new regulations.

In a blog post, Office of Personnel Management Director Katherine Archuleta said: “We understand that some groups have expressed apprehension over these changes. We take these concerns seriously and remain fully committed to working closely with charities and key stakeholders as we implement the final rule.”

Twitter: @JoeDavidsonWP

Previous columns by Joe Davidson are available at wapo.st/JoeDavidson.

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