The Internal Revenue Service appropriations bill has started its tortuous path through Congress—and it savages the agency’s funding. It provides 8 percent less than the current level and 22 percent less than the administration’s request. It’s less even than its budget 25 years ago when, as the Office of Management and Budget pointed out, “there were 38 million fewer taxpayers and a far less complicated tax code.”
It’s hardly surprising that the IRS faces congressional ire. Republicans still remember the way the agency mishandled requests for tax exemptions by Republican-leaning groups. And tax reform has surged to the top rank of issues that the army of the party’s candidates propose to do something about.
Of course, the tax collection business has never been easy. The Gospel of Matthew describes how Jesus dined at the home of a known tax collector and asked him to join his band of apostles. Jesus explained he had come to call sinners. Many observers concluded he got that characterization right—and the position of tax collectors hasn’t improved any since. For millennia, attacking revenuers has been good politics.
But it’s not always good government. For better or worse, it takes money to make money. The U.S. relies heavily on voluntary tax collection, but some taxpayers aren’t so eager to volunteer—and the eagerness of many taxpayers to volunteer the correct amount of taxes goes down if they guess that the odds of getting caught go down as well.
In Texas, for example, the local IRS staff was blunt. They are so shorthanded because of budget cuts that they won’t chase down taxpayers who owe less than $1 million. As Dallas’ supervisory revenue officer, Richard Christian, told a reporter, “Nobody’s ever going to knock on their door.” Meanwhile, the audit rate for taxpayers in general is steadily dropping—just 0.86 percent of individual taxpayers were audited in 2014, the lowest number in a decade. The biggest drop came in the most labor-intensive field audits. The more complicated the issue, the more the odds are increasing that taxpayers can skate by.
At the same time, it’s gotten much harder to obtain help from the IRS. In the last five years, the number of calls to the help line answered by IRS workers has dropped in half. In the last tax filing season, six of 10 callers didn’t get through, with 28 million calls for help unheard. It’s going to be mighty hard to maintain the rich tradition of voluntary taxpayer compliance if taxpayers can’t get answers to their questions and if they guess that the odds are small they’ll be audited anyway.
Then there’s the problem of shoring up the IRS’ increasingly cranky data systems. Its experts estimate that the agency is now three generations behind in software upgrades. That helped open the door to the theft of personal information from IRS computers on more than 100,000 taxpayers.
The more underfunded the IRS is, the less support it can give taxpayers, the less money it can collect from taxpayers who haven’t settled up, and the more vulnerable its information systems are. It’s clearly a case where the budget cuts don’t make cents.
Republicans on the Hill shot back that the IRS “can operate with less,” as the chairman of the House Subcommittee on Financial Services and General Government, Rep. Ander Crenshaw, R-Fla., put it. As the Appropriations Committee report argued:
“The IRS has failed to develop and implement a strategy for identifying and delivering timely taxpayer assistance in the form and manner most beneficial to taxpayers and cost-effective to the IRS. This is the antithesis of responsible stewardship. When combined with the inappropriate singling out of certain tax-exempt groups based on their political beliefs, wasteful spending on conferences and videos, and providing bonuses to staff and rehiring former staff without evaluating their conduct or tax compliance, the IRS is no closer to earning back the trust and confidence of the taxpayer than it was in 2013.”
The IRS just isn’t ever going to be a popular agency. Recent scandals have further weakened support. And congressional Republicans have in the last year found a winning strategy of continually zinging the Obama administration for management weaknesses, and they’ve benefited from a seemingly unending supply.
But there’s something else going on here, too. In the attack on the IRS, together with some of the tax cut proposals that have surfaced from some of the party’s leading presidential candidates, there’s a fresh taste for the starve-the-beast strategy: If a head-on attack can’t cut government, then a second best is to drain revenues wherever possible and use that as a weapon to beat back spending. It’s a strategy that’s worked, especially in braking the growth of discretionary programs. The Republicans enthusiastically trace the strategy back to Ronald Reagan, and there’s a quiet struggle underway for who among the Republicans is the most Gipper-worthy.
This is getting into dangerous territory, however. Tinkering with voluntary tax compliance could create much more serious problems ahead, both in funding programs that Republicans care about, like national defense, and in running the government they might win the right to run, if one of the dozens of Republican contenders wins the 2016 election.
There’s a growing disconnect between performing government’s functions and doing what it takes to perform them well. The war on the IRS sits in the shadow of both Matthew and the Gipper, and that makes it irresistible politics. Who wouldn’t want to attack tax collectors and starve the beast at the same time? But that also creates a huge risk for the party. With the attacks on the IRS, the Republicans could paint themselves into a corner from which it’s increasingly impossible to govern.
Donald F. Kettl is professor at the University of Maryland School of Public Policy.