How President Trump Could Make the IRS Great Again
The president, Congress, and the American taxpayer are none of them fans of the Internal Revenue Service. Voters were justifiably angered by well-publicized mismanagement in recent years on the part of high-ranking IRS executives, many of whom are gone but are probably collecting sizeable government pensions. These missteps included:
- Lois Lerner’s stone walling of Tea Party groups;
- IRS employees subsequently pleading the 5th before Congress;
- an extravagant Disneyland training conference;
- a multi-million-dollar technology contract awarded to a military school drop out with a fictitious injury who is now doing hard time for killing his wife;
- and IRS executives goofing off during the workday to practice line dancing (at least it wasn’t disco dancing) and making skits parodying Star Trek and Gilligan’s Island.
On Monday, President Trump signed an Executive Order freezing all federal hiring not directly related to the military, public safety, and public health. President Trump should have also exempted the IRS.
Despite all this, the IRS is not an agency out of control. The IRS answers to an alphabet soup of other government agencies which monitor its operations, such as the Government Accountability Office, the Treasury Inspector General for Tax Administration, and the IRS Oversight Board. The current IRS commissioner has clamped down on abuses and in many ways the pendulum has swung the other way. Now rank and file employees (the people who didn’t create the problems but have to clean up the mess) must complete a form and get high level approval to attend a free training conference across the street from their offices. Bathroom passes are probably next.
The bad news is that the IRS is now being starved of resources which it needs to keep the government running — the government which you the voters just elected and inaugurated. On Monday, President Trump signed an Executive Order freezing all federal hiring not directly related to the military, public safety, and public health. President Trump should have also exempted the IRS. Here’s why:
Why IRS Needs Funds Restored
The Federal Government’s fiscal condition is dire. The national debt hovers around $20 trillion ($20,000,000,000,000), with almost $9 trillion added during the Obama Administration. In 2016, the federal government ran about $1 trillion in the red. The voluntary compliance rate hovers only around 81%, and the Gross Tax Gap, the estimated amount of taxes that should be collected before enforcement efforts but is not, stands at $468 billion. This figure does not include the unpaid taxes from illegal activities such as pimping and drug dealing.
Despite the ballooning national debt and massive annual budget deficits, Congress has slashed the IRS budget 19% in constant dollars since 2010. This has resulted in the IRS hemorrhaging employees, from 95,000 in 2010 to 80,000 in 2015. This decline in personnel has resulted in fewer auditors, investigators, tax collectors, and people answering the phone. There are fewer people working at the IRS now than when Ronald Reagan took office.
In 1998, the IRS had about 3,300 highly trained special agents combating tax fraud, money laundering, and related financial crimes (I was one of them). Today there are fewer than 2,300. The same trend exists for revenue agents (the people who conduct field audits) and revenue officers (they do the actual collections). At this rate, getting caught cheating on your taxes is going to be about as likely as Publishers Clearing House knocking on your door.
The money invested in the IRS produces astronomical returns. The IRS uses the $5 billion Congress gives it for enforcement and reduces the Gross Tax Gap by $62 billion, resulting in an estimated annual Net Tax Gap of $406 billion. In other words, for every dollar you give the IRS for enforcement it returns $12 to the Treasury. MIT-trained economist Dr. Jeff Dubin wrote in a 2007 article that a $353 million additional investment would result in $16.8 billion, between in additional dollars collected and greater voluntary compliance. No business owner would forgo the opportunity to earn that kind of return on investment.
To tackle America’s fiscal nightmare, President Trump should exempt the IRS from the hiring freeze and press Congress to appropriate the funds necessary to close the Tax Gap. Start with an extra $2 billion. That would bring the IRS budget back to 2010 budget levels. Then hold the IRS accountable for every dime. Tell it to start with cracking down on the pimps and the dope dealers who never did an honest day’s work (I have a few names they can start with). Then go after the fraudulent tax preparers who add fake dependents and abuse the ITIN system to bilk the Treasury out of tens of billions of dollars in bogus refunds. Stop chasing the little guy, like my friend who is a semi-retired septuagenarian who filed his corporate return late (he was in the hospital) and is fighting a $1,700 fine.
President Trump has big plans to Make American Great Again. To do that, he needs to make the IRS Great Again. To my friends at the IRS I say this: Sharpen your pencils and double knot your wingtips. It’s time to get to work!