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IRS budget cuts could cost U.S. $4 billion a year, increase the federal deficit

In June, Internal Revenue Service Commissioner Douglas Shulman went before a Senate committee and told lawmakers that their plans to cut his agency's budget would be counterproductive.

Apparently, they didn't believe him.

Since Shulman's Congressional testimony, the House Appropriations Committee has approved an $11.5 billion fiscal 2012 IRS budget. The Senate Appropriations Committee has OK'ed a $111.7 billion version. Both funding measures are hundreds of millions less than the agency received last year.

But before lawmakers finalize any figures for fiscal year 2012, which began Oct. 1, the IRS commissioner has touched based with Capitol Hill once again to express his concern about losing operating money.

In a letter sent separately this week to each member of the Congressional tax-writing committees, Shulman put his worry into terms that Senators and Representatives, and the people who elect them, can easily understand: dollars.

Specifically $4 billion. And that amount is this week's By the Numbers figure.

4 billion IRS 2012 budget cut costs

Shulman's letter warns House Ways and Means and Senate Finance Committee members that proposed IRS spending cuts "will result in a direct increase to the nation's deficit."

Without sufficient money, wrote Shulman, "front-line IRS staffing levels must be substantially reduced, leading to a measurable decrease of approximately $4 billion in revenue annually, or seven times the reduction in IRS budget."

Less money also would have a direct and adverse effect on taxpayers, warned Shulman.

Responses to taxpayer letters "would be delayed up to five months" and "approximately half of the nation's taxpayers attempting to call the IRS would either be unable to get through or hang up in frustration," wrote the commissioner.

Other groups oppose IRS budget cuts: Shulman's letter came on the heels of a similar warning last week from the National Treasury Employees Union, which represents IRS workers. The union's chief said that "a failure to adequately fund the Internal Revenue Service is counterproductive to the best interests of the American people."

And the IRS Oversight Board, created by the 1998 IRS Reform and Restructuring Act, sent letters to House and Senate Appropriations Committee members, urging legislators to "fully consider short- and long-term consequences" of IRS budget cuts:

"[T]he Government must have the resources to do its job. The significant reductions in funding for the Internal Revenue Service in both the House and Senate bills will undermine taxpayer service, reduce collections from scofflaws, and add billions of dollars to the deficit."

Support from one W&M member: Shulman has the support from at least one member of Congress.

"Since March, I have had serious concerns about the impact of the Republican plan to cut about $600 million from the IRS budget," said Rep. John Lewis (D-Ga.), ranking member of the Ways and Mean Oversight Subcommittee, after receiving Shulman's letter.

Lewis said he agrees with the IRS commissioner that the proposed lower budget "will harm taxpayers, harm tax administration, increase the deficit, and cost the treasury $4 billion dollars a year. This makes no sense, particularly at a time when Medicare, Medicaid, and Social Security are under attack in the name of deficit reduction."

Trickle down tax impact? Will enough other Ways and Means and Senate Finance members and the rest of their colleagues in the full House and Senate agree?

Will Shulman's predicted $4 billion increase to the federal deficit affect decisions made by the Congressional super committee looking at ways to reduce America's debt?

And for us taxpayers, will a loss of funds mean that the IRS will be less willing to work with individuals who are having trouble paying their bills?

One rumor that's made the Twitter rounds is that the IRS is "trying to raise big $ to avoid getting their budget slashed. got a client w/a lien; IRS is pressing HARD."

The bottom line is whether we'll pay for the IRS services up front or pay in other ways for cuts to the national tax collecting agency.

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Do we really need a huge IRS? Ideas - increase taxes on the wealthy and go with flat taxes deducted from paychecks.

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