Lawmakers Slash IRS Budget as Punishment for ‘Underperforming’

House Appropriations Committee Chairman Rep. Hal Rodgers, R-Ky., says legislation targets underperforming agencies. House Appropriations Committee Chairman Rep. Hal Rodgers, R-Ky., says legislation targets underperforming agencies. J. Scott Applewhite/Associated Press

The House Appropriations Committee on Wednesday approved a financial services and general government bill that would cut the Internal Revenue Service’s budget by $838 million in 2016, on the same day an inspector general report warned that five years of cuts to the tax agency’s budget have crimped services to taxpayers.

“The legislation also finds ways to rein in wasteful spending, targeting underperforming agencies for cuts that are both functional and commensurate with their actions,” said committee chairman Hal Rogers, R-Ky. “The legislation includes provisions to stop the IRS from further implementing the individual mandate under Obamacare, to protect the right to free speech and political involvement,” his release said.

The bill, which also funds the Judiciary, the Small Business Administration, the Securities and Exchange Commission and the Federal Communications Commission, would give the IRS $10.1 billion, or $2.8 billion less than President Obama requested in February. The bill “reduces funding for nonessential areas, and holds the administration and the Internal Revenue Service more accountable to the taxpayer,” said Financial Services Subcommittee Chairman Ander Crenshaw, R-Fla.

On Tuesday before committee action, the White House sent the panel a letter warning that the funding levels would diminish enforcement capabilities and “lock in unacceptable” levels of service, such as the substandard support taxpayers now receive from call centers. The White House said the bill also would halt progress on projects such as the Criminal Investigation Identity Theft Clearinghouse, which aims to help IRS detect and quickly resolve tax return anomalies that can signal identity theft.

Tougher in tone was the statement from Colleen Kelley, national president of the National Treasury Employees Union, who called the bill a “draconian” and “devasting” return to the funding level of fiscal 1991, “when the tax code was far less complicated and the country had 38 million fewer individual taxpayers, according to the Office of Management and Budget.”

Noting that the IRS budget shrunk by $1.2 billion from 2010 to 2015, NTEU specifically warned that funding for operations support and business systems modernization programs would be slashed by $338 million and $40 million, respectively, and enforcement programs would get $538 million less. “Congress needs to provide the IRS with the resources necessary to carry out the responsibilities Congress has imposed on it,” Kelley said. 

The Senate Appropriations panel has not yet acted.

Also on Wednesday, the Treasury Inspector General for Tax Administration released a report concluding that “reduced budgets and collection resources at the Internal Revenue Service have resulted in declines in taxpayer service, case closures, and dollars collected.”

It said the agency’s Automated Collection Service has answered 25 percent fewer taxpayer telephone calls since 2011, and that “taxpayers whose calls were answered spent an average of eight minutes (97 percent) longer waiting for a representative than previously. Revenue officers collected $222 million (7 percent) less in fiscal 2014 than in 2011, the report said. Reductions in the number of revenue officers also meant they closed 34 percent fewer cases.

 “There is a significant correlation between the IRS’s reduced collection budget and the reduction in efficiency and effectiveness of its collection operation,” said J. Russell George, Treasury Inspector General for Tax Administration. “The availability of key collection employees directly affects taxpayer service and the IRS’s ability to take appropriate enforcement action on delinquent taxpayers,” he said. “Taxpayers may become frustrated and remain noncompliant if they are unable to reach a contact representative to resolve their tax issues.”

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