House Critics Say Collections Would Rise With More Agents : IRS Chief Challenged on Cuts in Budget

Democratic members of a House Ways and Means subcommittee attacked Internal Revenue Service Commissioner Roscoe L. Egger Jr. on Monday for proposing budget cuts of $30 million while acknowledging that tax collection problems and administrative snafus have worsened.

They took sharp issue with Egger’s statement that the agency’s proposed $3.5-billion budget for fiscal 1986, which includes 1,254 fewer employees, corresponds with “the desire of the Administration to achieve a freeze in spending across the board.”

“I don’t care if it comes from on high, from way up in the clouds,” declared Rep. J. J. Pickle (D-Tex.), chairman of the Ways and Means oversight subcommittee. “The question is, does it make sense?”

Pressed by Pickle on whether the IRS could collect more money if it had more agents and other employees, Egger responded: “Yes, of course. If we had more resources, we would have more training, more improvements in efficiency and more revenue.”

Possible Detriment Cited

Rep. Beryl Anthony Jr. (D-Ark.), another subcommittee member, told Egger: “Sometimes a freeze works to the detriment of the (federal) deficit. Why don’t we tell the folks at the (White House) Office of Management and Budget that a freeze doesn’t work in all areas?”

When asked about administrative problems, Egger said that the IRS’ Philadelphia service center, which handles all tax returns from the mid-Atlantic region, still has a backlog of 92,500 unanswered taxpayer inquiries. The center has been plagued by faulty performance of its new $103-million computer, officials have said.

In addition, the General Accounting Office has found that erroneous demands for payments were mailed out to 150,000 taxpayers in the region.

Under questioning by Pickle, Egger said he has confirmed that a supervisor in the IRS’ Austin, Tex., service center destroyed a large volume of taxpayer correspondence several months ago, apparently because that center, like most others, is months behind in answering taxpayer inquiries. However, he said no tax returns were destroyed and the supervisor resigned when confronted with the charge.

Tells Productivity Hopes

Egger also contended that even with his smaller budget he still hopes for better productivity, mainly through better management techniques and greater use of a new data processing system. But Anthony called Egger’s hopes “a pipe dream.”

Pickle said the tax agency needs a larger, not smaller, budget to try to close a growing gap between taxes owed and taxes paid, which Egger acknowledged has risen to an estimated $92 billion a year. But Egger said final figures from an intensive three-year effort by the revenue service to prosecute unscrupulous tax-shelter promoters “may show that the rate of growth (of unpaid taxes) has slowed down.”

Compliance with federal tax laws also has diminished in the last decade, Egger told the subcommittee. In 1974, 84 of every 100 Americans paid their fair share of taxes, but that figure now has dropped to 81.6, he said.

Although Egger did not cite a reason for the drop, IRS officials previously have attributed it to growing cynicism that “my neighbor is cheating on his taxes” and to an impulse to cut corners on taxes as inflation has pushed wage earners into higher tax brackets.

Direct Payoff Detected

Studies have shown a direct connection between agency costs and additional federal revenues, Egger said. For every $600 million in spending by the IRS, an additional $4.6 billion is realized in tax revenues, he said.

“We’re trying to achieve a balance between collection of more dollars and control of government expenditures,” Egger testified, explaining his desire to maintain a tight budget. But Pickle, noting that the fiscal 1986 IRS budget proposes 1,000 fewer employees than the agency had in 1980, insisted that the smaller budget is “false economy.”

Pressed by the subcommittee on how he would use 5,000 more IRS employees if Congress voted to exceed his budget request, Egger replied: “I would place the bulk of these resources in enforcement.”