Washington, D.C – Starving the Internal Revenue Service is counterproductive to deficit reduction and to the public because it hinders compliance with tax laws, makes it harder for taxpayers to reach anyone at the IRS and lowers the amount of revenue available to the federal government, the president of the National Treasury Employees Union (NTEU) told Congress Wednesday.
“NTEU knows any further reductions in funding and staffing will further exacerbate the adverse impact previous cuts have had on IRS’ ability to provide taxpayers with the service they need and enforcement of our nation’s tax laws,” NTEU National President Tony Reardon said in testimony submitted to the Senate Appropriations Subcommittee on Financial Services and General Government.
The subcommittee held a hearing on the fiscal year 2018 Treasury Department budget on Wednesday morning. NTEU is opposed to the administration’s FY 2018 budget because it calls for reducing IRS funding by an additional $260 million below the FY 2017 enacted level and reducing overall staffing by more than 4,200.
Reardon reminded the panel of the harm already done because the IRS has lost nearly 18,000 employees and $1 billion in operating funds since 2010.
There are fewer IRS professionals available to answer phone calls from taxpayers with questions; meet them in person; assist the poor or elderly with filling out their tax returns; combat fraud; and catch scofflaws.
In 2016 and 2017, Congress provided the IRS with an additional $290 million for customer service and to combat identity fraud, which drastically reduced taxpayer wait times and helped the IRS raise the level of service from 38 percent in 2015 to 72 percent and 79 percent respectively in 2016 and 2017. The administration’s budget calls for reducing seasonal staffing costs by $239 million for the upcoming tax filing year.
According to the IRS, every dollar invested in IRS enforcement programs generates roughly $6 in increased revenues. In FY 2016, IRS enforcement activities brought in $54.3 billion, down almost $5 billion from the $59.2 billion of FY 2007.
“Without sufficient staffing to effectively enforce the law to ensure compliance with tax responsibilities and combat fraud, our voluntary tax compliance system is at risk,” Reardon wrote. “And as the IRS Commissioner has repeatedly noted, a simple one-percent decline in the compliance rate translates into $30 billion in lost revenue for the government.”
Reardon also testified about the tax gap of $450 billion in taxes that are owed but unpaid.
“At a time when Congress is debating painful choices of program cuts and tax increases to address the federal budget deficit, NTEU believes it makes sense to invest in one of the most effective deficit reduction tools: collecting revenue that is owed, but hasn’t yet been paid,” Reardon wrote.
Finally, Reardon reiterated NTEU’s strong opposition to the renewed Congressional mandate that the IRS use for-profit private contractors to collect overdue federal tax debt, an idea that failed twice before in 1996 and 2006. It wastes money and increases opportunities for identity theft. It also replaces IRS professionals trained in tax compliance with contractors who work on commission, some of whom are known for treating taxpayers harshly and offering unsound financial advice.
“Subjecting taxpayers that are struggling to make ends meet and can’t afford legal representation to private contractors whose sole motivation is to maximize their own profits at the taxpayers’ expense is simply unfair,” Reardon wrote.
NTEU represents 150,000 employees at 31 federal agencies and departments.