More Money to Make Money

The Internal Revenue Service has 115,000 employees, about the same number as the Agriculture Department. Should it have more?

It should if the federal government is serious about trying to narrow the “tax gap,” the money that’s legally owed the Treasury by individuals and corporations but that goes uncollected because the income it reflects isn’t declared or detected. If all these unpaid taxes could be captured, the budget deficit would be slashed by two-thirds. That isn’t in the cards, but the chance to do a more effective collecting job is. President Bush’s new budget proposes a healthy, if overdue, boost in support for the IRS. A Congress concerned about shrinking the deficit should find no quarrel with that idea.

Under the proposal, the IRS would get $191 million more to hire 1,000 additional collectors and add 2,400 people to its audit staff. It would get another $146 million to modernize and maintain vital computer programs. What’s in it for the Treasury? At least another $3 billion in revenues that would otherwise go uncollected, a welcome change from the way things are now. For the past year, the IRS has been working under a hiring freeze and other cost-cutting measures that it says have led to a revenue loss of $350 million.

Stinting on support to the IRS has never made sense, not when each added dollar spent on compliance with the tax code brings in anywhere from $6 to $16 in revenue. The IRS has a lot of catching up to do. The 1991 budget marks a start.