It’s time to pay Uncle again. All over the nation people are searching for mislaid W2 forms, bank statements, receipts from charitable giving and other proofs demanded by the IRS in order to meet the April 15 tax deadline.
Some will make mistakes. Some will cheat, minimizing income or inflating deductions. But the odds of catching the cheats aren’t good and, with his call to cut the IRS budget by $239 million, President Donald Trump promises to make matters worse.
Who pays when taxpayers get away with paying less than their fair share? Honest people, especially working stiffs whose tax payments come off the top, and future generations, who will inherit a national debt that’s bigger than it needs to be.
It’s no surprise that Trump considers the IRS a mortal enemy. Historically, Republican officeholders, in Washington and in Concord, have favored fewer rather than more tax collectors.
In 2010, during the reign of House Speaker Bill O’Brien, Republicans slashed the budget of the Department of Revenue Administration, a move that cost the state tens of millions of dollars. The same will happen on a grand scale if the IRS’s battered budget is further reduced.
According to Trump’s own Treasury secretary, Steven Mnuchin, the IRS has 30 percent fewer employees than it did less than a decade ago. Audit rates for large corporations fell by nearly half in the last six years, from 17.8 percent to 9.5 percent. Less than 1 percent of all individual returns were audited last year, according to the Washington Post.
Funding for IRS enforcement operations also suffered deep cuts. The shortfall between what the Treasury was owed and what it was able to collect tops $450 billion per year, a sum that law school professor Dennis Ventry, writing in the New York Times, said equaled 80 percent of last year’s budget deficit.
Collectively, taxpayers will spend more than 6 billion hours to comply with the federal tax code, reason enough, one would think, to simplify the code and make it fairer. That effort is once again underway in Washington but, given the chaos in Congress and the inexperience of Trump and his team, real progress seems unlikely.
More than two-thirds of all taxpayers (68.5 percent, according to the IRS) take the standard deduction. As a result, they have little opportunity, short of earning off-the-books money, to cheat. Less than one-third of all households, 30.1 percent, itemize deductions. They tend to have higher incomes.
In 2013, the agency said, 93.5 percent of filers with incomes of $200,000 or more itemized.
In his confirmation hearings, Mnuchin said that he wanted to increase, not decrease, IRS funding and staff levels. “We add people, we make money,” he said.
As a businessman, the president should understand that. He wants more money for defense. He wants to build his border wall. He promised a $1 trillion plan to rebuild the nation’s infrastructure. Firing tax collectors will make it harder to achieve any of those goals, and it will make the nation’s tax collection system less fair.
The IRS collects $6 for every $1 spent on auditors and enforcement. The president should listen to his treasury secretary and add to – not cut – the IRS budget.