Complaining About More IRS Funding Is Ultimately Crazy

Whenever you hear someone say that they like to pay taxes, pull out the saltshaker, because you're going to need more than a grain. It’s not that they like sending in payments. Instead, they appreciate how much we have the government do—national defense, protecting the quality of food and medicines, funding basic research that will become important, setting international trade deals, major infrastructure construction, and so much more—and realize that they need to pay their portion of the bill.

Not everyone feels that way, though. For example, The Hill reported recently that the IRS has become the GOP’s boogeyman ahead of midterms:

“The GOP is warning that the $80 billion funding boost to the IRS included in Democrats’ tax, climate and health care package, which President Biden signed into law on Tuesday, will target middle-class Americans with an ‘army’ of new enforcement agents.

The calls have become a key part of Republicans’ messaging ahead of this year’s midterm elections.”

But it’s hardly new. Federal taxes have long been a target for politicians. Sometimes it’s one side saying that the wealthy don’t pay enough, although always with plenty of loopholes so their big donors keep their incomes high. Other times, the other side complains that everyone pays too much, except that ultimately translates into the wealthy paying too much and the regular folk not pulling their weight, so it’s, as one might guess, loopholes for their big donors.

The result has been an ongoing and slow-moving implosion of the tax agency’s capability to bring in money. It was certainly effective in the past. Years ago, I remember getting into a discussion with someone from the IRS enforcement branch who mentioned how it cost 5 cents to get a dollar of revenue. That is called low overhead.

And clearly too effective for those who would rather scuttle federal taxes and let things go down the tubes except for those wealthy enough to manage.

To get a sense, look at the historical numbers. In 1992, the IRS had 116,673 employees. By 1998, that was down to 98,037. Come 2013, it was 86,974. Then 79,890 in 2015, 73,519 in 2018. Up to 78,661 in 2021.

In the meantime, as the number of employees dropped by a third, population has grown. In 1992 again, it was 256,922,000. By 2021, 332,213,000. That’s up 30%, almost the same percentage change as the number of IRS employees, except in the other direction. At this point, that’s about 4,200 members of the public per IRS employee. Ever try to get someone on the phone to answer a question recently? Wonder why it has been taking so long to process taxes and returns?

Know what else takes a beating? The ability to get the wealthy to pay their taxes. Just over a year ago, David Cay Johnston, who won the Pulitzer Prize for his tax coverage back when he worked at the New York Times NYT , did his annual calculations of collections at DC Report. (Disclosure: I occasionally write for the site.) “In Obama’s last full year in office, 2016, auditors found almost $106 million of tax owed by affluent households, 20 times as much as in 2018,” he wrote. In Obama’s first year, the amount was $610.4 million. In 2018, under Trump (though the problem is largely systemic), the amount dropped by 99.1% to $5.4 million. “Even that 99.1% drop from 2010 to 2018 severely understates the collapse of tax law enforcement among the best off among us,” Johnston wrote. “That’s because the number of households making $10 million or more nearly doubled during those years from 13,322 to 26,517.”

Why? There aren’t enough auditors and experts to shake loose what should have been paid. That’s one thing that happens when you cut away at an organization. Fewer people don’t magically achieve the same results. The wealthiest 1% collectively don’t report a fifth of their income and account for a third of unpaid federal income tax.

Audits are happening. It’s just that the main targets are low-income people getting the Earned Income Tax Credit or other programs set up for people who make little. Why? Because from what tax experts have told me over the years, programs like EITC are complex, confusing even many pros, and people often make mistakes. And then, they will have wages, taxes easy to check, and no professional lawyers and accountants to push back and make it hard for the available IRS staff to successfully complete an audit.

In addition to collecting taxes, the entire technology supporting the tax system is from the 1960s and 1970s. To institute even minor form changes to go with tax modifications takes, as again I’ve heard over the years, rewriting the programs.

The number of new IRS employees you’ll hear is 87,000. But a lot of people need to be hired in areas other than auditing and this is over a 10-year period. And this doesn’t count employees who will retire in the meantime.

But, back to the initial business, which is who’s getting off from paying their share. "Prior empirical evidence demonstrates that the tax gap can be tied disproportionately to people in the top end of the income distribution,” the IRS itself notes.

The attack on funding the IRS is intended to incapacitate the agency so that more tax burden can be shifted to those who can least afford it from those who could most easily pay. Let’s stop the nonsense and get things back to a more even and fair keel.