Paul L. Caron
Dean



Wednesday, January 21, 2015

The IRS Scandal, Day 622

IRS Logo 2New York Times editorial, The Dangerous Erosion of Taxation I.R.S., Already Hobbled, Likely to Be Further Damaged:

The obsession among House conservatives to hobble the Internal Revenue Service is about to pay off this tax season in foolhardy budget cuts to the agency that will cost the government an estimated $2 billion in lost revenue.

That works out to about $6 in lost taxes for every $1 in cuts Congress made in reducing the I.R.S. budget another 3 percent this year, according to the Treasury Department.

The slashed budget is a victory for penny-wise-and-pound-foolish politicians. It amounts to payback demanded by House Republicans to penalize the I.R.S. for daring to scrutinize Tea Party operations that tried to claim exemptions under the tax code for nonpolitical groups. Democratic groups trying the same thing were also scrutinized.

Undermining the I.R.S. was part of the overall budget deal worked out by House Republicans, Senate Democrats and the White House. The agency — hardly the most popular of essential government offices — had too few defenders in the horse-trading. It is likely to suffer even more damage under the new Republican-controlled Congress.

https://taxprof.typepad.com/taxprof_blog/2015/01/the-irs-scandal-day-622.html

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Comments

One of the strangest aspects of the IRS “scandal” is the idea–adopted by the right and the left alike–that cutting the IRS’ budget “penalizes” the IRS. How does one penalize a governmental entity such as the IRS, that has no assets and no emotions? The answer is quite simple: it can’t be done. There is no sentient person “IRS.” The 90,000 or so IRS employees will not be penalized by the budget reductions. They will work their 40-hour weeks, some will work overtime or comp time, but in those 3,600,000 person-hours, they will accomplish roughly the same amount of work they accomplished in the comparable 3,600,000 person-hours of the previous year. Of course, in the previous year, there was funding to pay perhaps an additional 2,500 more employees, who accomplished 100,000 more person-hours of tax processing work. The net effect, following the imposition of the 4% budget-cut-“penalty” is 100,000 fewer person-hours of work done by the IRS. So who will suffer from this “penalty?” Certainly not the IRS workers–at least the 90,000 or so employees who still have jobs. Those 90,000 employees will work their 40-hour weeks; their in-boxes will contain more work, but the employees will work at about the same rate of efficiency as they did the prior year, maybe a little less, given the reduction in resources. Which means simply that in the aggregate, less work will be done, because there are fewer employees and resources to do it. So who will really be “penalized,” since there is neither an entity nor employees to penalize?

Unless you are uncommonly slow, you know the answer–the people who rely on the tax assessing, collecting, and resolution services provided by the IRS. In other words, the U.S. taxpayer. Nice job Congress. You really “punished” the IRS. You need to think this one through a little more carefully.

Posted by: Publius Novus | Jan 21, 2015 7:59:55 AM

The Public Integrity website says that the IRS rarely goes after public welfare entities for spending too much to influence elections. Starving the IRS makes enforcement of the law even less likely.

Posted by: john rooney | Jan 22, 2015 12:55:29 PM