Congressional leaders this week proposed slashing the Internal Revenue Service’s budget by $346 million as part of a $1 trillion spending package for the overall government next year.
Is that a wise choice or an act of spite toward an unpopular agency?
The IRS is a hard organization to love. Polling shows that Americans hold it in low regard compared to many other federal agencies, and its recent scandals — one related to lavish conference spending and the other to its targeting of nonprofit advocacy groups based on their names and policy positions — doesn’t help matters.
But the IRS may be one of the smarter investments for Congress, if you believe Treasury Secretary Jack Lew. The Cabinet official said last year that the agency yields $6 in collections for every $1 it receives for tax enforcement.
Despite its potential for big returns, the IRS has increasingly done more with less in recent years. Annual funding for the organization has declined by about 6.6 percent since 2010, despite the agency taking on new responsibilities related to the Affordable Care Act, known as Obamacare.
Additionally, the IRS workforce has shrunk by about 8,000 full-time employees since 2009. That includes a roughly 15 percent decrease in the number of workers dealing with tax enforcement.
The result has been lower performance. Congress’s nonpartisan Government Accoutability Office said in a report this year that the IRS budget and staffing cuts have “adversely affected operations,” including enforcement and customer-service functions. As an example, the review cited a near doubling of telephone wait times during the past four years.
The IRS, like any organization, could benefit from greater budgetary discipline. Its past conference spending, not to mention the $2.8 million in bonuses it paid to tax-delinquent IRS employees, are proof of that.
Indeed, the GAO said in its report that the IRS could improve its financial standing by managing operations more effectively, noting that “additional funding is not the only solution.”
Nonetheless, lawmakers may want to be cautious with how much austerity they impose on the IRS. The agency is already working with a smaller budget than it had five years ago — $11.3 billion in 2014 compared to $11.5 billion in 2009.