Robert E. Rubin served as U.S. treasury secretary during the Clinton administration. Jacob J. Lew served as U.S. treasury secretary during the Obama administration.
There was once a bipartisan consensus about the importance of funding the IRS’s vital taxpayer services. That consensus long ago eroded. In recent years, the IRS has been systematically starved of resources, and the harmful consequences are unmistakable. The agency has lost more than a fifth of its staff since 2010. Seven of 10 taxpayer phone calls go unanswered. Its computer software is based on technology from the time of the moon landing.
We all bear the costs of this neglect: The Treasury is deprived of a half-trillion dollars annually in uncollected taxes because of anemic enforcement of our nation’s tax laws.
This year, Congress took an important first step toward rebuilding the agency. The Inflation Reduction Act provided a one-time cash infusion of $80 billion. Of that, $45 billion will go to increased enforcement to begin to close the gap between taxes owed and taxes collected — funding that will more than pay for itself. The remaining $35 billion will be used to revamp the agency’s archaic technology, improve customer service and invest in changes that will restore the agency to basic functionality. The funds for long-term investments will remain available beyond the normal one-year cycle, so there is predictable funding for systems to be designed and implemented.
But Republican critics of the IRS claim that providing this basic funding will lead to menacing IRS agents “on every corner.” That fiction suggests a willful ignorance of history. In the mid-1990s, the IRS employed 15,540 revenue agents to audit taxpayers. Today, that number is 8,200. GOP critics also claim that the IRS singles out conservatives for tougher scrutiny, but repeated independent reviews failed to find any evidence of political targeting within the agency.
House Republican leader Kevin McCarthy (Calif.) has said that a bill rolling back the IRS funding will be the first order of business for the new majority in January. President Biden and the Democratic Senate have the power to block efforts to reduce the one-time funding, but House Republicans have a fallback option: targeting the agency’s base appropriation in must-pass legislation to keep the government operating.
As former treasury secretaries who oversaw the IRS, we commend the Inflation Reduction Act’s desperately needed investment in the agency. But the new, supplemental funds will only improve customer service and collections if Congress provides the needed base appropriations. Otherwise, the investment funds will be exhausted before the improvements are made, simply to pay for routine operations. We urge Congress to fund the agency as close as possible to the Biden administration’s fiscal 2023 request of $14 billion.
With sufficient base annual funding, the IRS can enforce our tax laws, deliver benefits to small businesses and provide fast, efficient service to all Americans.
There are other benefits, too: By providing base IRS funding through annual appropriations, Congress will continue to have the opportunity for oversight to ensure that increased resources are best used to restore the agency’s health.
Congressional appropriators are currently negotiating a year-end package to fund the government. They should vigorously oppose any attempts to derail the ongoing effort to rebuild the IRS by reducing regular annual funding.
And the Senate should also confirm Biden’s nominee, Daniel Werfel, as the new IRS commissioner to lead that historic implementation effort; Commissioner Charles Rettig’s term expired this month. Ensuring that there is a capable, non-interim commissioner at the agency’s helm is critical to its rehabilitation.
Even the Trump administration understood the need to rebuild the IRS. The 2020 Trump budget proposed funding the IRS with $11.5 billion in base funding (consistent with past levels), along with an additional $15 billion specifically “for new and continuing investments to expand and strengthen tax enforcement.”
The IRS also faces substantial needs to invest in 21st-century customer service. Half as many people received in-person assistance in 2021 as a decade earlier. As the agency looks to transform, it has committed to early investments to improve taxpayers’ experience. But Congress must provide ongoing funds to the agency to ensure it can make the most progress toward filing simplification and ensuring taxpayers receive the benefits and credits they are entitled to.
Funding the IRS is a crucial step toward building a federal tax agency equipped to meet the challenges posed by our 21st-century economy — and the demands of American voters who expect their government to provide at least a basic level of service. A two-pronged funding approach will get the agency where it needs to go.
This summer, the Biden administration and Congress acted in concert to pass the Inflation Reduction Act, reviving the depleted agency. Congress should ensure that huge step is not squandered.