Washington, DC – As millions of Americans filed tax returns last week, the Internal Revenue Service (IRS) finds itself strained under continued decreasing budgets and eliminated staff. At the same time the agency contends with the additional workload of a continually increasing mission scope, including processing taxpayer payments from three massive federal government stimulus programs. As a result, the agency is left challenged to effectively meet its core functions, according to a new American Council for Capital Formation Center for Policy Research (ACCF CPR) report, Internal Revenue Service: Increasing Workloads Under Strained Budgets.
“Increased population and a changing global economy have created challenges for the IRS,” ACCF CPR Executive Vice President and Chief Economist Pinar Çebi Wilber said. “Add in shifting priorities like immediate COVID-19 stimulus payments and now monthly child tax credit payments have left the agency woefully underfunded and undermanned. Its principal mission of return processing, taxpayer services, and enforcement are suffering as a result.”
The report notes that according to estimates, the IRS budget has fallen by 20 percent in inflation adjusted dollars since 2010, resulting in the elimination of 22 percent of its staff. Covid-19 and the additional workload that came with three stimulus packages have highlighted the IRS’s struggles in a number of areas including:
- Revenue Collection, Enforcement and the Tax Gap: In line with budget cuts, the chances of being audited has decreased, increasing the tax gap (the difference between the tax liability for a given tax year and the amount that is paid) and reducing revenues the agency collects.
- Taxpayer Services: The services provided by the IRS, such as answering calls and emails, and other means of taxpayer interaction have been declining. These services are especially important to help taxpayers to navigate the complex tax code and catch mistakes before returns are submitted.
- Operations Support and Business Systems Modernization: The IRS’s outdated information technology system has been a cause for a concern in light of increasing e-filing, wider data collection and security gaps that make the whole system susceptible to cyberattacks.
The ACCF CPR paper looks at different functions of IRS and highlights shortcomings not only in revenue collection/enforcement as highlighted by the current Administration but also in other crucial areas such as taxpayer services and operation support/infrastructure.
“Strains on the IRS are creating widespread taxpayer discontent and lost revenue for the federal treasury at a time when our national debt is spiraling out of control,” Wilber said. “Congress should ensure that the agency is adequately funded to perform its core duties effectively and think carefully before assigning additional tasks to an overworked agency without considering the ramifications for revenue collection and taxpayer service.”DOWNLOAD FULL REPORT
The American Council for Capital Formation Center for Policy Research is a nonprofit, nonpartisan economic policy organization dedicated to the advocacy of pro-growth tax, energy, environmental, regulatory, trade and economic policies that encourage saving and investment.