BUSINESS

GOP's cuts to IRS budget will tax our patience

By cutting the IRS budget, Republicans are making the nation's chronic debt woes worse, @Davidlaz writes

Republican Sen. Ted Cruz, speaking this week at a conservative policy summit, presented what he called the "single most important tax reform" America could make: abolishing the Internal Revenue Service.

That probably won't happen any time soon. But Republican lawmakers have managed to slash the tax agency's budget by more than $1 billion over the last five years and eliminate about 13,000 jobs.

And now taxpayers will pay the price — not in cash but in aggravations such as delayed refunds, unanswered questions and epic waits on hold, if you can get through on the phone.

Nina Olson, the federal government's national taxpayer advocate, warned in a report Wednesday that taxpayers face "the worst levels of taxpayer service since at least 2001," when the tax agency started measuring its performance.

IRS Commissioner John Koskinen said Thursday that crippling the agency's resources represents "a tax cut for tax cheats."

"To the extent we have fewer people to audit and enforce the tax code, that means some people cutting corners on their taxes or not complying are going to get away with it, and that is a decision that Congress has made," he said.

So how bad will things get for people who do want to pay their taxes?

Olson predicted that the IRS will be able to answer less than half the roughly 100 million calls it receives annually from taxpayers. Nearly 60 million calls probably will just ring and ring, she said.

For taxpayers who do get through, Olson said, they can expect to be on hold an average of 30 minutes "and considerably longer at peak times."

Questions about tax law will be limited to simple matters. Taxpayers can forget about anything that requires actual expertise or research.

And if you need any assistance filling out your tax forms, forget it. The IRS won't do that anymore.

"Taxpayers who need help are not getting it, and tax compliance is likely to suffer over the longer term if these problems are not quickly and decisively addressed," Olson said.

Let's be honest: The IRS isn't anyone's favorite government entity. These are the guys who reach into our pockets every year, snatching away what many people think is an unfair share of income. These are the guys who wield the blunt object known as an audit.

Republican lawmakers have had an easy time muscling the agency because, really, who wants to be the one to stand up and defend the taxman? That's like singing the praises of the Department of Motor Vehicles.

At the same time, though, there are the small matters of keeping the government running, national security, defense, Social Security, Medicare and the numerous programs that make life livable for millions of people, such as aid for the poor and disabled.

"The IRS touches everyone's lives," said Edward Kleinbard, a professor of law and business at USC's Gould School of Law. "We're all the beneficiaries of an effective Internal Revenue Service."

From 2007 to 2009, he had a ringside seat for IRS-related political shenanigans. Kleinbard was chief of staff for Congress' Joint Committee on Taxation, a nonpartisan body intended to help lawmakers craft policy and legislation.

He said Republicans cynically demonize the tax agency rather than undertaking the more complex and politically challenging task of reforming tax law.

"It's an intellectually dishonest enterprise to go after the agency rather than do something about the tax code," Kleinbard said. "The IRS doesn't own the tax code. Congress owns the tax code."

Roger Gordon, an economics professor at UC San Diego, picked up on the IRS' warning about increased tax evasion. He said this could be especially prevalent among businesses and rich people.

Ordinary taxpayers have the bulk of their income reported by employers, and most taxes are automatically withheld. But businesses self-report much of their performance, just as wealthier taxpayers are supposed to come clean on capital gains.

"The only incentive we have to report accurately is the threat of being caught," Gordon said.

The IRS' Koskinen warned this week that the latest round of budget cuts for the agency means there will be 46,000 fewer audits this year. He also said IRS employees should prepare for unpaid leaves and reduced hours.

The cutbacks, Koskinen said, could mean that about $2 billion in tax revenue will go uncollected.

He said Thursday that taxpayers should turn to the agency's website for any questions they might have and should use the phone "only as a last resort."

But that may be insufficient in many cases, especially for people who now qualify for a health-insurance tax credit under Obamacare. There's going to be plenty of confusion about that this year.

The IRS isn't perfect. However, critics of the agency shouldn't kid themselves. Government revenue doesn't magically appear. It has to be collected.

If Cruz, the Texas senator, and his conservative cronies think they can do better, then by all means, place some tax-reform legislation on the table.

Until then, all they're doing is making a bad problem — the nation's chronic debt woes — even worse.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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