The IRS Needs Reform, Not More Taxpayer Dollars

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Posted by Alexander Hendrie on Thursday, August 27th, 2015, 2:08 PM PERMALINK

IRS management is insistent on claiming they are starved of taxpayer dollars, and any problems with the agency are because they do not have enough funding. But in reality, the agency is poorly managed and has failed time and time again at its basic responsibilities. Taxpayers are being ill-served by inept bureaucrats that are more concerned about harassing conservatives and businesses than doing their job.

At every chance, IRS officials claim that the agency is cash-strapped. Union Chief Colleen Kelly recently said the IRS is “struggling to keep the lights on.” But this claim does not hold up under scrutiny.

According to the National Taxpayer Advocate’s 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.”

In addition, 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.

In fact, the IRS budget has doubled in the past 30 years, even after adjusting for inflation, according to an analysis by Cato Institute economist Dan Mitchell, Although its funding has declined since 2010, it remains higher than mid 2000s levels.

Recently, the IRS disclosed that hackers had stolen the information of over 330,000 taxpayers. Hackers then used this information to file fraudulent tax returns.

Unfortunately, the IRS hack was entirely preventable. The IRS had been warned by the Treasury Inspector General for Tax Administration (TIGTA) to strengthen their protection of data on seven occasions since 2007. TIGTA has issued almost 50 recommendations that the agency failed to implement before the hack, including 10 more than three years old. Even when the agency had higher funding, they failed to perform due diligence time and time again.

The agency’s poor decision making continues to this day. The IRS recently hired trial law firm Quinn Emanuel to perform an audit of Microsoft, a highly unusual decision that may have violated federal law and has prompted an investigation by the Senate Finance Committee.

But perhaps worse, the agency’s decision to hire a $1,000 an hour, litigation-only white shoe law firm is an egregious waste of taxpayer dollars. The IRS already has 40,000 employees dedicated to enforcement efforts and could have turned the case over to either the IRS office of Chief Counsel or a Department of Justice attorney. Employees in both offices already have the expertise to conduct an examination without putting sensitive information at risk.

Instead the supposedly cash strapped IRS chose to hire an elite law firm under an initial $2.2 million contract.

Lastly, the Senate Finance Committee released a damning report examining the Lois Lerner tea party targeting scandal earlier this month. The report concluded that Lerner’s personal beliefs led her to discriminate against conservative organizations applying for non-profit status. Lerner was able to do so because the agency had given her complete autonomy.

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

Photo Credit: Simon Cunningham, https://www.flickr.com/photos/lendingmemo/

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