Taxes

Backwards Budgeting for the IRS


The Government Accountability Office has a new report highlighting what must be the roughly, oh, 537,608th case of short-sighted budgeting, this time involving cuts at the Internal Revenue Service.

Since 2009, the IRS has cut its workforce by 8,000 jobs, largely from its enforcement staff.

That has forced the IRS to reduce how much it polices whether people and companies pay all the taxes they owe. In 2011, for example, the IRS audited 6.2 percent of the filings by businesses with more than $10 million in revenue. This year, the figure is down to 4.2 percent.

Data from previous years show that the government makes more than it spends on several main enforcement programs. For each dollar the IRS has spent on audits, it has recouped from $3.40 to $5.40. The return on its collections operations was even higher.

President Obama has requested a budget increase that would restore many of the cuts, based on a similar logic. Here’s the return the IRS expects for better policing wealthy individuals and fraudulent tax refunds.

The IRS has also reduced how much it spends on staff training. “From fiscal years 2009 through 2013, per-employee spending dropped from $1,450 per… to less than $250,” the GAO wrote. In that time, training costs for the “large business and international” division was down 92 percent, and the “tax exempt and government entities” group had its training cut 96 percent. That last division is the group that’s been the focus of ire from House Republicans, who say the IRS improperly targeted Tea Party nonprofits for scrutiny. Don’t count on them to be kind to the idea of boosting the IRS budget.

Weise_190
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

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