In addition to other benefits, a simpler tax code would improve efficiency and customer service at the Internal Revenue Service, the national taxpayer advocate said in a report released Wednesday. She also called for increased IRS funding.
“Tax code complexity strains the IRS’ ability to serve taxpayers, while a simpler code would make the job of the tax administrator much easier -- something that would benefit taxpayers and the government alike,” wrote Nina Olson, the agency’s public ombudsman, in her annual report to Congress.
The IRS, which has 90,000 full-time employees, performs “many of its tasks very well,” but faces “daunting challenges,” the report said, citing as key performance indicators the staff’s record on answering taxpayer phone calls and responding to taxpayer correspondence. “Despite the fact that about 90 percent of individual taxpayers rely on preparers or tax software packages, the IRS received more than 115 million calls in each of the last two fiscal years,” Olson wrote. “That is a staggering volume of calls, and not surprisingly, the IRS has had trouble answering them. In fact, the problem is growing worse."
From fiscal 2004 to fiscal 2012, the number of calls on the IRS Accounts Management phone lines rose from 71 million to 108 million, yet the number of calls answered by live assistors (as opposed to automated responders) declined from 36 million to 31 million. The average time calls were kept waiting over the same period rose from slightly more than two and a half minutes to close to 17 minutes.
The IRS receives more than 10 million letters from taxpayers yearly, the report noted. Yet over the period of fiscal 2004 to fiscal 2012, the backlog of unanswered correspondence increased by 188 percent, to more than 1 million pieces of mail.
Olson mentioned other arguments in favor of tax code simplification, among them that the current code imposes a paperwork and financial burden on individuals and businesses, that its complexity reduces compliance rates, and that it leaves average taxpayers unclear on the link between the taxes they pay and the services government provides. Like many IRS commissioners and employee union spokesmen, Olson argued that IRS budgets deserve special consideration because of the “return on investment” -- the agency’s fiscal 2012 budget of $11.9 billion placed against the $2.52 trillion in revenue it collected is a return of 214 to 1, the report said.
The appropriation for IRS has shrunk every year since fiscal 2010 and “absent congressional action, it is likely to be reduced more in the coming years, perhaps significantly so, by sequestration or other budget cuts that replace the sequestration mechanism,” the report said. “More than 90 percent of the IRS’ taxpayer service and enforcement budget goes for personnel costs, so budget cuts mean that fewer employees will be available to answer phone calls from taxpayers needing assistance.”
A reduction in trained staff, the report argued, in turn will add to delays in responses to such problems as identity theft, and will weaken ongoing efforts to reduce the stubborn gap in taxpayer compliance.
Olson said Congress should “consider revising the budget rules so that the IRS is 'fenced off' from otherwise applicable spending ceilings and is funded at a level designed to maximize tax compliance, particularly voluntary compliance, with due regard for protecting taxpayer rights and minimizing taxpayer burden.”