IN ITS FIRST year, the Reagan administration misguidedly cut Internal Revenue Service personnel along with most other domestic agencies. When it turned out that each dollar saved on IRS agents cost the Treasury $10 to $20 in taxes, more tax collectors were hired. But IRS resources are still inadequate. The Treasury estimates that it now loses almost $100 billion a year to tax evaders, most of them normally honest citizens who still find it difficult to resist the temptations provided by a complicated tax code and increasingly spotty enforcement.
Detecting these evaders--and distinguishing them from the many others who make honest mistakes or take advantage of legal opportunities for tax avoidance--is a mammoth job. The IRS now receives over 100 million individual and business income tax returns each year. Computers can help somewhat, and IRS sorely needs money to continue modernizing its facilities. But computers can only match information and tax returns, check arithmetic and flag suspiciously large deductions, a small part of the job.
For example, IRS computers currently flag 5 million returns for substantial underpaying of taxes on interest and dividends. But that's just the first-- and easiest--step on the way to collection. Each possible discrepancy must then be rechecked by human agents and, if circumstances warrant, pursued through audits and possibly protracted court proceedings. Even when a taxpayer's liability is established, actual collection of taxes and penalties may drag on. The IRS currently has a multi-billion dollar backlog of uncollected receipts that is growing rapidly.
The most efficient and least intrusive way to help the IRS collect taxes would be to simplify the tax code and, whenever possible, withhold taxes on income when the income is paid. That would have a wholesome effect on both tax receipts and the economy. But, instead, the loopholes multiply, and efforts to streamline collections are stymied at every turn. Surely the society should not tolerate a situation in which the tax burden is borne disproportionately by the honest and by wage earners whose opportunities for evasion are few. Tax collectors are not popular folks, but the government needs more of them. As Congress now considers IRS' appropriation for next year, it should make sure that these are provided.