"When all is lost," a comic once said, "ask the IRS -- they'll find something." That's easier said than done these days, however, because three in ten people who call the IRS for guidance this tax season will have their questions go unanswered. But, rather than blame the agency, frustrated taxpayers should focus their anger at the real culprit -- Congress.
On Capitol Hill, lawmakers are imposing more demands on the IRS while refusing to provide the resources to ensure that the agency can do its job. The agency then must cut staff, leaving it unable to collect hundreds of billions of dollars a year that taxpayers owe their government.
This "tax gap," now estimated to total $450 billion a year, corrodes public confidence in government, with taxpayers who try their best to comply with the tax laws increasingly feeling as if those who cheat on their taxes are playing them for suckers -- and getting away with it.
How did we get here?
The IRS is unlike any other public agency both in what it does and how it is funded. It depends on a fickle Congress that refuses to set a long-term path for the agency and stick to it. Instead, the IRS in recent decades has lived life on a pendulum, swinging between the goals of law enforcement and of customer service.
When the political winds blow in one direction, with the federal government short of cash and the public demanding action against tax cheats, Congress pressures the IRS to crack down, beef up enforcement, and generate more money for Washington.
That lasts for a few years until we see stories -- real or imagined -- about IRS abuse of taxpayers, high-handed audits, and the like. At that point, Congress steps in and demands that the IRS back off enforcement and beef up its customer service.
Today, the IRS' challenge is even more imposing, with the agency buffeted by a swirl of conflicting political headwinds. In the past year, the IRS took a $300 million budget cut and trimmed 5,000 jobs. At the same time, it regulates and administers an increasingly complex tax code -- one that now features more than 3.8 million words and undergoes hundreds of changes each year that require new paperwork, updated computer systems, revised audit procedures, and lengthy explanations for tax preparers and the public.
Soon, the IRS will face a new challenge -- administering health reform once it takes effect fully. In his 2012 budget, President Obama proposed to increase the IRS's annual budget by approximately $950 million, so that it would total $12.8 billion, in part to ensure that it could administer health reform. But Republicans, who overwhelmingly opposed health reform, led the successful charge to cut IRS funds to $11.8 billion; some Republicans would eliminate the agency altogether.
Scrapping the IRS may sound tempting, especially now that tax season is upon us, but consider this: The IRS collects about $2.5 trillion a year, or an estimated 92 percent of all federal receipts. The agency says that for every dollar it gets from Congress, it generates $200 of federal revenue.
Taxpayers who think that underfunding the IRS budget won't affect them negatively should think again. Staff cuts and the rise in identity theft cases related to tax refunds led the IRS to warn taxpayers earlier this year that it may have to delay refunds. Some early filers have reported delays of a month or longer.
By slashing the IRS budget, Congress has achieved something truly noteworthy -- undermining its own ability to raise revenue and cut the federal deficit. Isn't that a bit like cutting off your nose to spite your face?
Christopher Bergin is President and Publisher of Tax Analysts and an expert on federal tax policy. He has written extensively on federal tax issues for almost 30 years, and he now blogs for Tax.com.
"Tax Gap" is just another Tag Line for a Congressional Hearing on $$$ for the above.
Simplify the Tax Code, who needs more CPA's ?
One thing that could be done is to simply explain the rules more clearly.
So, instead of hiring more people to run down the evaders (a legitimate concern). Make it simpler, automate collection, and you will save huge amounts
http://www.huffingtonpost.com/2011/04/11/irs-funding-cuts-congress_n_847741.html
IRS Funding Cut Days Before Report Shows $330 Billion In Uncollected Taxes
"WASHINGTON -- As part of the budget deal hashed out on Friday evening, lawmakers agreed that no additional federal funds would be used to hire new IRS agents.
Then on Monday, the Government Accountability Office publicly released a study showing that, as of the end of fiscal year 2010, roughly $330 billion in federal taxes had never been paid -- an amount that, if collected, would represent nearly nine times the amount of savings as the budget itself.
The dual developments aren’t shocking. Despite evidence that a single dollar spent on enforcing the tax code could result in up to ten dollars in revenue, politicians, naturally, are reluctant to align themselves with tax collectors. And yet, the sacrificing of funds for IRS agents in the continuing resolution deal underscores a particular problem that seems bound to confront fiscally conscious lawmakers.
“Cutting back on IRS enforcement could easily cost the treasury much more in revenue than it saves,” said Chuck Marr, Director of Federal Tax Policy at the Center on Budget and Policy Priorities..."
Why not just do a flat tax or fair tax system and cut out ALL deductions...period. One just pays a flat rate (based on money MADE, not earned or through some invested rig) which is based off a rising scale...the more one makes the more one pays as a percentage with a cap at say 30% (or whatever).
When tax was established only the rich paid taxes, now it is almost the other way around.
http://www.sparknotes.com/history/european/frenchrev/summary.html
SparkNotes: The French Revolution (1789-1799): Summary of Events
"No one factor was directly responsible for the French Revolution. Years of feudal oppression and fiscal mismanagement contributed to a French society that was ripe for revolt. Noting a downward economic spiral in the late 1700s, King Louis XVI brought in a number of financial advisors to review the weakened French treasury. Each advisor reached the same conclusion—that France needed a radical change in the way it taxed the public—and each advisor was, in turn, kicked out.
Finally, the king realized that this taxation problem really did need to be addressed, so he appointed a new controller general of finance, Charles de Calonne, in 1783. Calonne suggested that, among other things, France begin taxing the previously exempt nobility. The nobility refused, even after Calonne pleaded with them during the Assembly of Notables in 1787. Financial ruin thus seemed imminent.
The Estates-General
In a final act of desperation, Louis XVI decided in 1789 to convene the Estates-General, an ancient assembly consisting of three different estates that each represented a portion of the French population. If the Estates-General could agree on a tax solution, it would be implemented. However, since two of the three estates—the clergy and the nobility—were tax-exempt, the attainment of any such solution was unlikely..."