IRS budget would allow for thousands of new hires

President Obama's fiscal 2012 budget includes $1.1 billion in new funds for the Internal Revenue Service, about a 9 percent increase from 2010 levels that would translate to 5,112 new hires, or a 5 percent expansion of enforcement operations. "The new enforcement personnel," says an IRS fact sheet, "will generate more than $1.3 billion in additional annual enforcement revenue once the new hires reach full potential in FY 2014."

The service is focusing its expansion of enforcement on "noncompliance among corporate and high-wealth taxpayers" and on enforcing return preparer compliance," it said, adding, "increased resources for the IRS compliance programs yield direct, measurable results through high return on investment activities" -- a return of 4.5 to 1 that, the service noted, can be used toward deficit reduction.

Republicans, long wary of an IRS they see as overreaching, reacted with skepticism. Sen. Charles Grassley, R-Iowa, a Finance Committee member, said in a statement to Government Executive: "The IRS needs to show it's making the best use of existing resources before receiving more. For example, two commissioners in a row have acknowledged that IRS employees spend too much time on union activities while on the taxpayers' dime.

"The Obama administration also was quick to end an effort to use outside contractors to try to collect taxes that are owed but the IRS admitted it would not try to collect," Grassley said. "That program would have brought in owed tax dollars without increasing the number of IRS employees. The president should be clear on why additional resources are needed and how they are going to be used."

Colleen Kelley, president of the National Treasury Employees Union, which represents many IRS employees, applauded the proposal. "This commitment by the White House reflects an understanding of the reality that every dollar invested in the IRS results in additional revenue to the treasury -- an absolutely critical element in attacking the federal deficit and the $345 billion gap between taxes owed and those paid," she said. "The administration's 2012 funding level for the IRS would permit the agency to improve services through increasing response rates to inquiries, deploying enforcement resources to what the White House called high-return integrity activities and by modernizing information technology systems."

Office of Management and Budget Director Jack Lew, testifying on Tuesday before the House Budget Committee, was asked by Rep. Marlin Stutzman, R-Ind., how many of the potential thousands of new federal employees the president's budget proposes would be IRS agents. Lew said he did not know.

The prospect of 5,112 new IRS agents is "worrisome" to Pete Sepp, a spokesman for the conservative National Taxpayers Union. "Unlike some claims about new agents being hired for the health care law, this seems pretty clearly a targeted enforcement effort, and based on taxpayers' past experience, they have every reason to be concerned about potential abuse."

The IRS budget also includes expanded funding for implementation of the 2010 Affordable Care Act during the next several years, noting that 80 percent of its request for this purpose is for information technology systems spread across several ongoing programs. The budget proposes $18 million, or a 16.2 percent increase, in funds for enforcing the related health care tax credit enacted in 2002.

Rep. Cathy McMorris Rodgers, R-Wash., has introduced legislation that would prohibit the IRS from hiring new employees to enforce the individual mandate in the health care reform law.