Today’s House Bill: Slashing the IRS Budget. But we’ll pay for it…

July 9th, 2013 by Lapekas Law Staff

Last month, news outlets were in an uproar over the $4.1 million the IRS spent on a 2010 employee-training conference held in Anaheim, California. Much of the controversy surrounded the approximately $50,000+ spent on obnoxious training videos with little redeeming or educational value. Other amounts spent ($133,000 to hire outside speakers at the event) also raised ire. These controversial expenses, as well as the controversy surrounding the IRS’ disproportionate scrutiny of conservative organizations’ tax-exempt status applications, have kept reporters busy.

Not surprisingly, politicians on both sides of the aisle have taken advantage of the IRS scandals to bolster their respective images and agendas. Neither side wants to lose the opportunity to show their constituents that they will not tolerate a foolish or overreaching IRS. This is understandable.

However, today’s House Republican appropriations bill is not. It makes no sense at all. In fact, it serves to promote only one agenda: their image.

Surely this is not the agenda Republican voters signed up for. Unfortunately, but not surprisingly, the agenda comes at a cost, which cost is ultimately paid for by the people the Republicans are intending to impress.

Today, in response to the evidence of $4.1 million in “wasteful” government (IRS) spending and the IRS’ “inappropriate actions” surrounding its targeting of political organizations, House Republicans propose to cut the IRS’ budget by $3 billion. This amounts to a 24% budget cut, which would provide the smallest budget that the IRS has seen in 13 years.

I imagine that House Republicans are hoping this bill serves as a message to their constituents that they are fighting for them, tooth and nail, against the IRS. And I imagine House Republicans hope their constituents see the bill as evidence that their elected officials are on Capitol Hill fighting to keep tax bills low and IRS agents from knocking on their door. “Punishing” the IRS by slashing its budget will prevent future scandals and waste, which thus means that taxpayers won’t overpay their taxes or be unduly harassed . . . right? I hardly think so.

Rather, I believe a smaller IRS budget may result in more scandal, less opportunities for honest hard-working taxpayers to dispute the IRS’ audits and determinations, and more opportunities for people who cheat, evade, or even steal (e.g. fraudulent refund claims) from the IRS to continue to do so.

Take, for example, those tax-exempt status applications. Perhaps to more efficiently determine which organizations did not qualify for tax-exempt status, the IRS singled-out organizations with names that, in and of themselves, suggested that the organization’s “politicking” outweighed their promotion of social welfare, and thus should not be tax-exempt. Arguably, a dismally-funded IRS would resort to similar discriminatory practices to more efficiently meet its obligations.

Fewer funds also mean less money available to modernize technology that could detect fraudulent returns or refunds. In 2009 the IRS failed to detect fraudulent claims filed by jail and prison inmates and as a result the United States Treasury lost over $39 million.

The IRS budget currently provides support for taxpayer services, including pre-filing assistance and education, filing services, and the Taxpayer Advocate Service. These services often serve to save taxpayers money (e.g. free tax return preparation). Less money means fewer resources to ensure that these programs are easily accessible to those that need them. As a result, taxpayers will pay more—not less—in taxes.

Think you’re on hold a long time when you call the IRS now? Try calling when the IRS has 24% less resources to pay for employees to staff the call lines or maintain its computer and telephone equipment.

What about people paying an accountant or attorney to represent them before the IRS? Expect higher billable hours because he or she will receive slower or less competent service and thus must spend more time to achieve the correct result.

A more just system of taxation cannot be achieved by strangling the only means through which taxpayers can challenge the IRS’ audits and determinations.

We can’t expect better and more competent service from an under-funded Service.

So what can we expect from a drastic cut to the IRS’ budget? If you’re a prisoner, you might expect new schemes to go undetected and start picking out new décor for your cell. And the rest of us? What can we expect?

Elevator music. Lots of it.