In a welcome show of bipartisan cooperation, lawmakers appear to be moving forward on IRS legislation that they say would help taxpayers, reduce tax-refund fraud and improve tax-collection efforts.
Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ron Wyden (D-Ore.), the panel’s ranking member, introduced the Senate bill last week. Many of its provisions are similar to those in legislation the House approved with overwhelming bipartisan votes last spring.
The IRS often faces unfair criticism and even open hostility from some elected officials, but there is certainly room for improvements in the agency’s operations.
Nina E. Olson, the national taxpayer advocate, has made that clear year after year in her even-handed reports to Congress. (Olson runs an independent organization within the IRS that focuses on how the federal government can improve tax-collection efforts.)
Hatch last week expressed confidence that the Senate bill would “streamline the agency in a way that protects taxpayers from fraud and abuse, increases electronic filing and supports IRS employees.”
Wyden said the legislation would make “common-sense changes to help taxpayers,” improve administrative IRS rules and provide better safeguards against “financial predators.”
They said the legislation would enhance scrutiny of IRS audit criteria. In addition, the bill reportedly creates a single point of contact at the IRS for victims of tax-related identity theft and gives the IRS commissioner some flexibility in shifting appropriated funds to deal with tax fraud.
Improving IRS efficiency could mean some immediate savings for the government. The long-term financial benefits of the proposed changes, however, could be even more significant.
Taxpayers who are already frustrated by complex tax laws often encounter poor customer service at the IRS. This can mean lost tax dollars, as Olson reiterates in a recent report:
“Over the long run, voluntary compliance is the least expensive form of compliance to maintain. It is also the least burdensome from the taxpayer’s perspective. Importantly, voluntary tax compliance is heavily linked to customer service and the customer experience.”
The IRS hardly deserves all of the blame for taxpayer frustrations, however. Congress itself is culpable.
First of all, lawmakers are responsible for the overly complex and constantly changing tax code.
The tax legislation that Congress and President Trump approved last December, for example, failed to deliver as much simplification as its supporters promised.
In addition, even as they were voting on that legislation, elected officials were talking — and continue to talk today — about making more changes in the tax code in the near future.
Still more changes are likely down the road because the federal budget has a chronic mismatch between revenue and spending, and December’s deficit-financed tax cuts made that problem worse.
Congress has also failed to ensure that the IRS has sufficient funding to do its job properly.
“Since fiscal year (FY) 2010, the IRS’s funding has been cut substantially,” Olson recently reported. “The IRS’s appropriated budget has been reduced by 9 percent in straight dollar terms and by 20 percent after accounting for the effects of inflation.”
So lawmakers who want to improve IRS administrative operations shouldn’t stop there.
They should also work across party lines to agree on appropriate IRS funding, further simplify the tax code, and close the unsustainable gap between tax revenue and federal spending.
