Internal Revenue Service officials have been complaining for years about the steep cuts in their budget ordered by Congress that have forced the agency to curtail customer service and dramatically scale back its enforcement actions to maximize tax collections.
Just last month, the IRS reported a $458 billion annual gap between the taxes owed by Americans and those actually collected. IRS officials and some government watchdogs blamed the flagging enforcement actions on IRS budget cuts totaling 17 percent since 2010. Some of the deepest cuts were made by IRS officials in the area of tax code enforcement and investigation.
“As you might imagine, these staffing losses have translated into a steady decline in the number of individual audits over the past six years,” IRS Commissioner John Koskinen said during a speech at the National Press Club in late March. “Last year, in fact, we completed the fewest audits in a decade. Plus, our audit coverage rate in 2015 was the lowest since 2004. That trend line of fewer audits will continue this year.”
But on Tuesday, Koskinen revealed that he had somehow scraped together enough money in his current budget to hire 600 to 700 employees for the tax-enforcement operation, as The Wall Street Journal first reported. And the IRS chief described it as the “first significant enforcement hiring in more than five years.”
Koskinen, who has been in charge of the tax collection agency for nearly two years, said the extra funds will come from retirements and workforce turnovers, as well as “efficiencies” in the agency’s operations. However, he provided few details.
Although recruiting 600 to 700 new employees won’t make up for all the deep cuts and reductions in service of thousands of investigators, lawyers and other specialists involved in enforcing the tax code, Koskinen said the new hires would fill in some of the more glaring gaps in the workforce and pave the way for a few long-overdue promotions.
In past years, job attrition across the agency helped to absorb the overall $900 million in budget cuts, he said in the memo, but that left large gaps in various areas. This year, “we’ve determined that we have the resources available to hire these employees as a result of the rate of attrition in enforcement and your continuing dedication to find efficiencies to help us with the budget,” he said.
"This is a good development for our tax system," Koskinen said in his memo to employees, which was provided to The Fiscal Times. "When you look at the IRS overall, every dollar invested in us returns at least $4 to the Treasury. The numbers are even higher when it involves enforcement. Each enforcement position typically returns almost $10 to the U.S. Treasury for every dollar spent -- and in many instances, much more."
Chuck Marr, a federal budget specialist with the Center on Budget and Policy Priorities, said on Wednesday that the announcement signaled that enforcement is a top priority for Koskinen, “but obviously they are sort of scraping around for funds there and relying on attrition and finding money.”
“But I think the longer-term solution is that Congress needs to reverse course and needs to give him the money,” Marr said. “He’s doing what he can, but the cuts have been almost a quarter of force of personnel since the Republicans regained control of Congress in 2010. It has been very harsh and troubling.”
Since 2010, Republican congressional leaders have targeted the IRS for stiff budget cuts, in part as retaliation for some of the agency’s more controversial policies, including the one-time adverse targeting of Tea Party and other conservative non-profit political organizations that were seeking tax-exempt status.
There are now nearly 12,000 fewer enforcement employees, a 23 percent decline from the nearly 50,000 previously employed in that area, according to Marr.
The IRS and the Obama administration have been seeking a substantial boost in the agency’s budget for the coming year. Lawmakers grudgingly increased this year’s agency budget by $290 million, but those funds were earmarked for improving customer service and cybersecurity – not tax collection enforcement.