We’re Talking Serious Money Here

Do President Bush and Congress seriously want to slash the budget deficit? If so, they might finally try giving the Internal Revenue Service the money it so badly needs to enforce the tax laws more effectively. Rep. J.J. Pickle (D-Tex.), who chairs the Ways and Means Committee’s oversight subcommittee, says this year’s “tax gap”--the difference between the taxes individuals and corporations legally owe and what they actually pay--will hit nearly $100 billion.

If that money could find its way into the Treasury, where it belongs, two-thirds of the budget deficit would be eliminated.

These owed taxes go uncollected because the IRS, like so many federal agencies that lack support from powerful political constituencies, gets too little money to do the job the law says that it should be doing. Studies show that every $1 the IRS spends to assure compliance with the tax code brings in $6 to $16 in extra revenue. This remarkable return on investment only underscores the absurdity of under-funding IRS operations.

In 1980 the IRS had the staff and budget to audit 2 out of every 100 tax returns. In 1990, says Pickle, it will have the means to audit fewer than 1%. Fewer audits increase the chances for successful tax cheating.

This is only the beginning of the IRS’ woes, though. Inadequate funding also prevents the service from pursuing delinquent taxpayers who have an identified unpaid liability of $60 billion. It doesn’t let the IRS hire the outside experts it needs to win and collect in complex tax-evasion cases. And it forces the IRS to stint on training employees, including those who handle the public’s calls for information and whose answers have been found to be wrong more than 30% of the time.

The record is clear: short-changing the IRS hurts every honest taxpayer and every consumer of government services. The remedy is clear as well: Give the IRS what it needs to do the job it’s supposed to do, and then count the additional billions in owed taxes that roll in.