The IRS is reeling from nearly a decade’s worth of budgetary restriction, imposed by Congress at Republican insistence beginning in 2011. The IRS’s fiscal 2018 appropriation of $11.4 billion was almost 20 percent lower than what it got in fiscal 2010. Not surprisingly, staffing for enforcement has declined by about a quarter in that period, according to a recent report by the Government Accountability Office. Technology makes it possible for each remaining auditor to do more and obviates the need to undertake certain audits in the first place. Still, there is widespread recognition that the IRS cannot keep trying to do more with less. Instead, it has been obligated to do less with less. In addition, according to the GAO, cuts have forced the agency to scale back planning for future workforce needs as it scrambles to keep up with current demands.
GOP supply-side doctrine holds that tax cuts pay for themselves through higher economic growth and the attendant revenue. In fact, increased spending on the IRS’s enforcement capabilities pays for itself — by making it possible for the government to collect everything taxpayers owe. A $20 billion increase in IRS enforcement funding over the next decade would produce $55.3 billion in additional revenue, a net gain of $35.3 billion, according to the Congressional Budget Office. Even then, the government would still probably be missing out on many billions of dollars because of noncompliance. The IRS estimates that it was unable to collect $406 billion over the three-year period of 2008-2010, a time when its funding was at a recent peak.
To its credit, the Trump administration proposed in its most recent budget $14.5 billion in new IRS spending over 10 years which, it said, would generate a $33 billion net reduction in the deficit. Democrats are right to point out that lax compliance disproportionately benefits the well-to-do; the vast majority of the new resources ought to be targeted at upper-income households. Everyone who favors both tax fairness and fiscal soundness should be hoping that the two parties will find room for agreement on IRS funding in the coming budget negotiations.