As late filers rushed to meet the April 18 tax filing deadline this year, the Internal Revenue Service (IRS) was still trying to work through mountains of last year’s tax returns. The Washington Post reported in February that nearly 24 million taxpayers were still waiting for the IRS to process their returns. Many refunds have been blocked for 10 months or more.
Trying to phone the IRS for help with this year’s taxes was nearly impossible. Only one in five phone calls were answered. If it’s any consolation to frustrated taxpayers, that rate is significantly better than the 50-in-50 chance of hitting a human being reported last year.
As if that weren’t enough to make taxpayers hate the IRS, what about the tax structure, which decidedly favors the wealthiest Americans. The 2017 tax bill, for example, greatly favored America’s top earners. A study found that the 400 wealthiest families in the United States paid an average tax rate of 23% under the bill, while the bottom half of households paid a rate of 24%. The fundamental flaws in the tax bill were not the responsibility of the IRS, but the agency has been at the center of taxpayer ire.
It’s no wonder, then, that the IRS is one of our most hated federal agencies. The agency was at the bottom of the public perception scale in 2013, with an overall unfavorable rating of 51%, which climbed to 65% among mainstream Republicans. In 2019, the IRS saw some improvement, with an overall favorable rating of 55% that included 49% Republicans. So what has caused the dysfunction of the IRS and the lack of public esteem for the agency?
Beginning with the Republican takeover of the House of Representatives in 1995, there has been a constant drumbeat against the IRS among congressional Republicans. We began to hear calls among the mainstream GOP for the abolition of the IRS. Republicans have made repeated efforts to cut the agency’s budget and limit its auditing capabilities. They’ve had a good measure of success, especially over the past decade.
The House Budget Committee reported in October 2020 that from 2010 to 2018, “the IRS’ funding was cut by 20% in inflation-adjusted dollars, resulting in the elimination of 22% of its staff.” This left the agency “understaffed, constrained and operating with archaic information technology systems”. In turn, IRS audits and collections “have reached historic lows.” As the agency’s staff dwindled, its workload grew — first, with the administration of the Affordable Care Act and, more recently, with the disbursement of federal stimulus funds.
The Republican drive to cripple the IRS goes hand in hand with its repeated efforts to provide tax breaks to the wealthiest Americans. Lobbyists for the top earners work on both counts – getting tax breaks for the well-wishers, then hampering the IRS’ ability to collect what’s actually owed. The fewer IRS auditors there are, the less likely it is that the IRS will collect taxes that are rightfully owed. The IRS has fewer auditors now than at any time since 1953.
IRS Commissioner Charles Rettig told Congress last April that the United States was losing $1 trillion or more in revenue every year because of complicated tax dodging. According to Rettig, the loss of talented audit and enforcement staff has left the agency “overwhelmed” when it “challenges the aggressive actions of some of the most sophisticated taxpayers.”
Despite its loss of auditors, the IRS has attempted to maintain the number of audits it conducts each year, but this has produced a perverse result. The easiest audits are those conducted against low-income taxpayers, where a result can be found with a flick of the computer. The country’s poorest families are five times more likely than anyone else to be audited. Even collecting from tens of millions of low-income taxpayers could not make a noticeable dent in the trillion or more dollars not collected each year.
The way to ensure that filers get top-notch service from the IRS, including prompt refunds, is to adequately fund this important agency. Adequate funding would also allow the agency to collect the billions of dollars that remain owed each year by those wealthy individuals who do not believe they have a responsibility to pay what they legally owe the country. A concerted effort to prosecute fraudsters would make everyone feel more comfortable shelling out their hard-earned cash.
President Biden has proposed spending $80 billion over the next 10 years to improve IRS operations. Fred T. Goldberg, Jr., an IRS commissioner under the first President Bush, called Biden’s plan “transformative.” He said: “A decade of stable funding is needed to recruit and train talent and build on the technology needed – not just for compliance purposes, but to meet the quality of services that the vast majority of compliant taxpayers expect and deserve.” Amen!
It’s time for the country to show some love for the only federal agency that collects way more revenue than it spends. Republicans in Congress must commit to properly funding this essential agency, rather than continuing their relentless efforts to destroy it.
Jim Jones is a Vietnam veteran who served eight years as Idaho Attorney General (1983-1991) and 12 years as an Idaho Supreme Court Justice (2005-2017). He is a regular contributor to The Hill.