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House Committee IRS Budget Proposal Short-Sighted, Counterproductive

Tuesday, July 9 2013

Washington, D.C.—A budget proposal slashing funding for the Internal Revenue Service (IRS) by 24 percent for the next fiscal year would set the agency back by more than a decade and leave taxpayers struggling to get assistance from this critical government agency, said the leader of the union representing IRS employees.

“A cut of 24 percent—nearly a quarter of the IRS funding—would take the agency’s budget back to just above the level of more than a decade ago, in fiscal 2001,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU). “In terms of the ability of the IRS to meet its mission on behalf of the American people, such a budget would absolutely devastate the agency.”

The fiscal year 2014 proposal for IRS funding was released today by the House Appropriations Committee. The IRS budget is contained in the Financial Services and General Government appropriations bill.

In a letter to members of the Financial Services Subcommittee, President Kelley urged lawmakers to reject that budget proposal. “The drastic cuts to IRS’s budget come at a time when the IRS workforce is already facing a dramatically increased workload, with staffing levels down by more than 20 percent below what they were just 15 years ago,” she wrote.

Kelley added that “NTEU believes that only by restoring critical funding for effective enforcement and taxpayer service programs can the IRS provide America’s taxpayers with quality service while maximizing revenue collection that is critical to reducing the federal deficit.”

Since fiscal 2011, IRS funding has declined by $1 billion from a cut of $305 million for fiscal 2012, followed by a reduction of more than $600 million in the current year resulting from sequestration. These funding cuts have forced the IRS to reduce the total number of full-time permanent employees by 8,000 since the end of fiscal 2010. In all, more than 5,000 of those cuts have involved front-line enforcement employees, significantly straining the agency’s ability to provide both enforcement and taxpayer services.

What’s more, because of sequestration, IRS employees already have suffered through three unpaid furlough days—during which no IRS services were available to the public—and face as many as four additional such days by the Sept. 30 end of this fiscal year.

President Kelley is not the only one concerned about the public impacts of insufficient IRS resources. In her 2012 annual report to Congress, National Taxpayer Advocate Nina Olson identified chronic underfunding as one of the most critical problems facing the agency and America’s taxpayers.

Fewer phone calls are being answered and taxpayers are having increasing difficulty in obtaining face-to-face assistance from the IRS, Olson told Congress, noting in addition the increasing complexity of the tax code.

Limited IRS resources impede its ability to conduct education and outreach to taxpayers—particularly small businesses; to help fight growing identity theft; to enforce tax laws, which contributes to a growing gap between taxes owed and taxes paid; and similar issues.

The IRS budget that would be required under the Appropriations Committee allocation to the Financial Services subcommittee would translate to a loss of more than $14 billion in revenue in fiscal 2014 alone, President Kelley said, given the reality that every dollar the IRS invests in enforcement programs generates about $7 in return.

She emphasized that NTEU will oppose these cuts as strenuously as possible since they would effectively cripple the agency, which already is dangerously understaffed.

The Appropriations Committee sought to justify its action by pointing to the issues in the IRS’s Tax-Exempt function regarding applications for tax-exempt status. In referring to that matter, it said its bill withholds 10 percent of the IRS’s enforcement budget—$386 million of a proposed $3.86 billion —until all the recommendations of the May 14 audit by the Treasury Inspector General for Tax Administration (TIGTA) are implemented.

In rejecting that action, Kelley said that the TIGTA report specifically found no evidence of intentional wrongdoing or political motivation on the part of IRS employees in the Tax-Exempt Division. Additionally, the IRS has said it intends to implement all the TIGTA recommendations.

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.

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