The IRS Has a Management Problem, Not a Funding Problem

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Posted by Alexander Hendrie on Tuesday, February 16th, 2016, 1:30 PM PERMALINK


In his final budget request, President Obama called for increasing the IRS budget by over $1 billion a year. Given the IRS's record of ineptitude and incompetence, the last thing the agency needs is more money.

The budget proposal includes an additional $530 million in direct, discretionary funding and $515 million for a “multi-year program integrity cap adjustment for tax enforcement,” which would bring the agency’s total budget to over $12.3 billion in 2017.

The White House and the IRS justify this proposal with the claim that the agency is cash-strapped and in desperate need of more taxpayer dollars. Union Chief Colleen Kelly has even said the IRS is “struggling to keep the lights on.” The latest talking point from the White House is that the supposed lack of funding means the IRS is even unable to answer phone calls coming from taxpayers looking for help.

In reality, the agency’s woes are due to its management problems, not because of insufficient resources. The IRS has proven time and time again that it has failed to wisely spend money.

In fact, according to the National Taxpayer Advocate’s 2015 Annual Report to Congress, the IRS is unable to justify spending decisions. As the report stated:

“The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”

The IRS even failed to properly prioritize funding even when budgetary pressure did not exist – the agency has failed to produce a single report on tax complexity since 2002, despite federal law requiring one be compiled each year.

Even now, little has changed.

According to a pair of reports released by the Government Accountability Office (GAO), serious internal control flaws mean the IRS may still be unfairly selecting Americans for an audit “based on an organization’s religious, educational, political, or other views.”

As GAO notes, certain deficiencies increase the risk of unfair audit selection based on a taxpayer's First Amendment rights. As the report finds:

“The control deficiencies increase the risk of selecting organizations for audit in an unfair manner—for example, based on an organization’s religious, educational, political, or other views.”

Again, despite their supposed lack of resources the IRS made the call to hire trial law firm Quinn Emanuel to perform an audit of Microsoft. Even though the white shoe law firm had zero experience handling sensitive tax data, taxpayers have been footing bills of over $1,000 per hour for its services.  

Earlier this year, it was revealed that the agency erased a hard drive belonging to a former top employee involved in this case, despite a preservation order on all documents related to the IRS hiring of the outside firm. While the agency was able to recover a backup tape, this is not the first time they have failed to preserve key information.

The IRS also “accidentally” destroyed the hard drive belonging to Lois Lerner during investigations into the targeting of conservative groups. As many as 24,000 emails were lost forever when 422 backup tapes were wiped clean despite an agency-wide preservation order and congressional subpoena.

While the agency continues to plead poverty, it is clear that the problem is gross mismanagement, not lack of funds. IRS officials seem more interested in targeting conservative groups and harassing businesses than actually doing the job that taxpayers pay them for.

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