I’ll give Congress some credit for appropriating funds to 11 out of 12 agencies through next September, though frankly, that’s their job, so keep the champagne on ice. And, of course, when you’re talking federal budgets, the devil’s in the details. And there are some ugly details in this budget.
For example, in addition to language that would weaken aspects of Dodd-Frank, the proposed legislation cuts the IRS budget.
Recent House Republican budgets have called for large, deep tax cuts that thankfully – as our future challenges are much more likely to call for more, not less, revenue – haven’t been legislated. In that regard, one way to view these IRS cuts, especially given some of the facts I report below, is as a back door way to reduce taxes, not by policy, but by undermining the agency’s ability to reduce tax evasion (not to mention, its role in implementing Obamacare).
IRS funding levels have been slashed dramatically in recent years, down nearly $2 billion in real terms between fiscal years 2010 and 2014. As shown in the chart below, the House budget would cut the agency’s budget even further.
Why is reduced IRS funding a problem? As my CBPP colleagues Chuck Marr and Joel Friedman report:
…vital federal services [have] suffered as funding has declined. The IRS faces cost pressures common to most programs, such as a growing workload and the effects of inflation. But it also faces unique demands, such as the growing problem of identity theft and the tax compliance issues associated with offshore accounts. Demands will only grow in coming years, as the IRS implements the Affordable Care Act and the Foreign Account Tax Compliance Act, which is designed to avert illegal tax evasion that occurs through the use of offshore accounts.
The agency’s enforcement budget has been hit hard by cuts, and if this new budget were to become law, its inflation-adjusted funding level would be down by 20 percent since 2010. The Treasury estimates that a $1 investment in enforcement yields a $6 return; there’s a strong case to be made for a substantial increase in IRS funding. Remember, these are not new taxes; they’re taxes owed that are being left on the table due to underfunded enforcement of the existing code.
There’s also some serious chutzpah going on here when the same politicians who call for the IRS’s defunding complain about enforcement problems. If lawmakers are serious about reducing error rates, they must provide the agency with adequate resources.
So let’s be clear about this proposed budget cut: it’s not simply motivated by the desire for “less government.” It’s a way to cut taxes without explicit tax cuts.
More broadly, budgets aren’t just numbers on a spreadsheet. They represent our priorities. They speak to how we can meet the challenges we face. So ask yourself: is what’s holding America back right now too much financial oversight and not enough tax avoidance?
That’s one of them thar rhetorical-type questions.