Former Commissioners Warn IRS Budget Cuts Hurt Enforcement

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WASHINGTON – Seven former Internal Revenue Service commissioners are decrying ongoing House and Senate appropriations cuts for the IRS, warning they are hurting tax enforcement as well as taxpayer assistance, among other things.

In a four-page letter to Republican and Democrat leaders of the appropriations committees, the former commissioners said they are greatly distressed that the House and Senate panels have proposed fiscal 2016 appropriation cuts for the IRS of $838 million and $470 million below the $10.9 billion enacted level for fiscal 2015, respectively.

The $10.9 billion level for fiscal 2015 was already $1.2 billion or 10% below the level appropriated in 2010 and 18% below the 2010 level when inflation is taken into account, according to the Center on Budget and Policy Priorities. The House and Senate cuts for fiscal 2016 would be $4.8 billion and $2.45 billion below President Obama's $12.9 billion budget request for the agency, respectively, according to IRS and congressional documents.

"It is clear to each of us that the IRS appropriations reductions over the last five years materially and adversely affect the ability of the IRS to assist taxpayers who are trying to comply with their tax obligations, as well as the ability of the IRS to detect and deter taxpayers who have not complied with their tax obligations," the seven said. The annual loss to the federal government from reduced tax enforcement has been $6 billion last year and is expected to be $8 billion this year, they added.

The letter does not mention the IRS' tax-exempt bond office, but tracks with statements made in May by TEB director Rebecca Harrigal that the office has had a significant reduction in staff over the past few years and has had to do "less with less." In June, the tax-exempt bond panel of the IRS' Advisory Committee on Tax-Exempt and Government Entities presented TEB with recommendations on how it can increase its efficiency and effectiveness as it faces dwindling resources and increased market complexity.

In their letter to lawmakers, the seven former IRS commissioners said, "The appropriations reductions for the IRS over the last five years total $1.2 billion, more than a 17% cut from the IRS appropriation for 2010. None of us ever experienced, nor are we aware of, any IRS appropriations reductions of this magnitude over such a prolonged period of time."

As a result of the cuts, the IRS has lost about 15,000 full-time employees through attrition over the last five years, with more expected to leave with these proposed cuts, they said. The losses are coming at a time when the workforce at the agency is aging, they said. Three years from now about 38% of all IRS employees will be eligible to retire, they warned.

While Congress has cut the IRS' appropriations, it has repeatedly passed major tax legislation that has substantially increased the agency's workload, the seven said. Additionally, the IRS is facing growing tax challenges, such as non-compliance in the international tax arena, identify theft, refund fraud and cybersecurity threats. The IRS is hit with about one million attempts each week to hack into its main information technology systems, according to the former commissioners.

The seven also squarely put the blame on Congress for increasing the complexity and confusion in the federal tax code by adding more and more socio-economic incentives, which are not related to the IRS' principal job of collecting revenue. These incentives relate to health care, housing, retirement, energy, education and other areas, they said.

"Some have argued that the IRS can solve these problems by simply becoming more efficient," they said. "This argument ignores the reality that the IRS is already, by far, the most efficient tax collection agency among the large countries in the world."

"We respectively call upon each of you to support and work to accomplish the passage of an IRS appropriations request for FY-2016 that is substantially in excess of the appropriation for the IRS in FY-2015," the seven former commissioners concluded.

The seven former commissioners and the years they were in office are: Charles Rossotti (1997-2002); Margaret Richardson (1993-1997); Shirley Peterson (1992-1993); Fred Goldberg (1989-1992); Lawrence Gibbs (1986-1989); Sheldon Cohen (1965-1969); and Mortimer Caplin (1961-1964).

Their letter was sent to Senate Appropriations Committee chairman Thad Cochran. R-Miss., the panel's top Democrat and vice chairwoman Barbara Mikulski, D-Md., House Appropriations Committee chairman Harold Rogers, R-Ky., and ranking minority member Nita Lowery, D-N.Y.

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