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IRS Commissioner John Koskinen recently claimed that his current budget will force the agency to send refunds more slowly, perform fewer audits and even shut down for several days over the coming year.  The agency is pleading poverty, but according to the Annual Report to Congress released by the National Taxpayer Advocate, the IRS has failed to prioritize past budget decisions. According to the report:

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

The problem is not that the IRS does not have the information available. To the contrary, as the report explains: 

“While IRS collected some data that it could use to evaluate effectiveness, it did not develop plans to analyze the data or track it in a way that would allow officials to draw causal connections and develop valid conclusions about the effectiveness of its 2014 service changes.”

While the IRS is crying foul about its funding, it has not even attempted to properly ensure that scarce taxpayer funds are allocated effectively. As a result, the report states:

 “the IRS has come under scrutiny by external oversight organizations who have questioned the IRS’s rationale for its budget decisions. They have not been satisfied with the IRS’s response to their inquiries.”

National Treasury Employees Union President Colleen Kelley claims that the agency is “struggling to keep the lights on”, however the IRS has 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.

When asked by the NTA to explain why this had not happened, the IRS said it would require “about two full time employees working for about a year” to produce the report. The IRS has 82,982 full time employees.

Although the IRS claims it needs more taxpayer dollars, an analysis by Cato Institute economist Dan Mitchell, shows the IRS’s budget has doubled in the past 30 years, even after adjusting for inflation. While its funding has declined since 2010, it remains higher than mid 2000s levels. In fact, as the NTA points out, the IRS’s refusal to compile these reports is actually making their jobs harder:

“While the IRS would need to spend some resources to produce the complexity report, these costs pale in comparison to the costs of complexity. Moreover, if they prompt a reduction in tax complexity, the reports might ultimately help the IRS do its job and reduce the cost of administering the tax code.”

The above cited material can be found on pages 26-30 & 102-108 of Volume One of the National Taxpayer Advocate’s Annual Report to Congress.

The full report may be accessed here.