Another case of deregulation by starvation: the IRS

Extending and expanding upon our recent observations about deregulation by budgetary starvation--”defund to defang” is how we put it the other day--economist Bruce Bartlett examines the sad case of the IRS.

“Republicans have been playing this trick with the Internal Revenue Service for years,” Bartlett writes in the Fiscal Times. “The agency has become the all-purpose whipping boy to excite Tea Party members and divert attention from the performance problems resulting directly from Congress’s failure to fund it properly.” And not just Republicans: “The Obama administration has stood by passively, doing nothing whatsoever to counter Republican attacks.”

Bartlett speaks as a GOP insider, with credentials that date back to service as an economist on the staffs of Reps. Ron Paul and Jack F. Kemp in the 1970s, and later in the George H.W. Bush White House. He later became a leading critics of the economic policies of George W. Bush.

He points us to the latest report of the IRS Oversight Board, which has been fighting budget strangulation for years. Since 2009, the agency’s congressional appropriation has fallen from more than $12.2 billion to $11.3 billion, the sum it will receive from the just-passed appropriations bill.

According to the board, the consistent underfunding of the agency has resulted in a drop of enforcement revenue from $57.6 billion in fiscal 2010 to $50.2 billion in 2012. Other metrics, including those dealing with taxpayer service (mostly to middle- and working-class taxpayers) are also sharply down.

The budget squeeze on the IRS is cynical in the extreme, as well as penny-wise and just plain foolish. The oversight board estimates that enforcement returns $6 for every dollar spent.

The training budget also has been ruthlessly cut, Bartlett observes--from $172 million in 2010 to $22 million in 2013. If you want to know why IRS personnel had to take shortcuts to weed out “political” nonprofits from legitimate nonprofits eligible for tax-exemptions--the process that gave the House GOP the opportunity to scream about supposed discrimination against their pet political groups, there’s your answer. Adding to the cynicism, the training cuts come just as IRS employees need to start administering the Affordable Care Act.

Bartlett sees all this coming to a bad end. Lack of enforcement breeds scofflaws. “Once people begin to evade taxes it tends to multiply,” he writes. “No one likes to think they are a schmuck for paying what they owe when their friends and neighbors brag about making up phony deductions or hiding taxable income.”

He concludes with the line from Justice Oliver Wendell Holmes to the effect that taxes are the price we pay to have a civilized society. “Republican scapegoating of the IRS is reprehensible,” Bartlett writes, “and ought to end.”

Reach me at @hiltzikm on Twitter, Facebook, Google+ or by email.

MORE FROM MICHAEL HILTZIK

Obamacare success stories you haven’t read

Federal judge asks: Where are the Wall Street prosecutions?

Obama is right to focus on inequality