If any agency should be protected from thoughtless budget cuts, it’s the Internal Revenue Service, upon which the rest of the federal government depends. The agency collects 91 percent of federal receipts but costs less than half of 1 percent of the budget. Some IRS enforcement efforts return $4 to the government for every $1 spent. Such programs are a classic case of how expanding government funding can actually reduce the deficit.
Alas, the overzealous crusade against government spending cut $600 million from the IRS budget with the sequester law of 2011, and the agency has never recovered. Although some funding has been restored, the IRS budget has not kept pace with new responsibilities. It will cost the agency $440 million to enforce penalties in the Affordable Care Act, but Congress hasn’t obligated any new funding in that area. According to IRS Commissioner John Koskinen, budget woes have caused the IRS workforce to shrink by 10,000. As a result, 18 million calls from taxpayers have gone unanswered. The IRS will do 100,000 fewer audits this year, which could result in the loss of more than $1 billion in revenue.
As an ideological measure, starving the IRS might make sense. But as a strategy to reduce the deficit, withholding needed funding for the IRS is penny-wise and pound foolish.