I come not to bury IRS agents but to praise them. That's not a popular argument coming so soon after tax day. In fact, it's not a popular argument in American politics, period. But I'm not here to win friends. I just want to pay less in taxes.
You can generally judge exactly how unpopular something is by a political party's desire to tie the opposition to it. So it's telling that the GOP is now attacking Obama's health-care law because it will … create jobs at the IRS (and I thought they were worried about unemployment?). "You can't run," warned the grim announcer on a recent RNC advertisement. "There is no place to hide. Over the next few years, IRS agents will begin to multiply." Newt Gingrich was kind enough to offer up numbers. "One of the things in the health bill is 16,000 additional IRS agents," he warned.
As FactCheck.org exhaustively showed, that's not "one of the things in the health bill." Actually, there's virtually nothing in Gingrich's statement that's true. The bill does not say the IRS should hire 16,000 new agents. That's from a press release from the Republican staff on the House Ways and Means Committee that was a misleading extrapolation from a Congressional Budget Office report. The CBO report said that the IRS would need $5 billion to $10 billion to administer the bill. Republicans took $10 billion, divided by the cost of an agent's salary, and said the bill would employ that many agents. Apparently, none of these people need desks. Or office space. Or special IRS badges.
In reality, the bill won't require hiring many new agents. Most of the new work will be administering tax credits to low-income individuals and small businesses. That's a job done by IRS employees, not "agents." But misleading math aside, it's worth challenging our apparent consensus that IRS agents should be viewed with the same fearful contempt we normally reserve for bookies and investment bankers.
Every year the IRS collects data on "the tax gap." The tax gap is the difference between the taxes the agency knows it's owed and the taxes the agency has actually been paid. In fiscal year 2008, the tax gap was $345 billion. That's about 14 percent of the total taxes collected that year. And you know who makes up that shortfall: those of us who didn't dodge our taxes.
As long as we're going to have a tax system, we may as well make sure we're all paying our share. But the GOP has conducted a long campaign to defang the IRS's ability to do that. In the late '90s, the Republican-controlled Senate Finance Committee held a series of dramatic hearings in which individuals sat behind screens and haltingly, tearfully, told stories of IRS persecution. Some of the stories featured genuine misdeeds. Others fell apart upon later examination (Robert McIntyre, the director of Citizens for Tax Justice, remembers one in particular where it turned out the witness was living off his employee's payroll taxes).
But the trials worked to demonize the IRS. The result was the IRS Restructuring and Reform Act of 1998, which made enforcement more difficult and began a long cut in the IRS's collection resources.
A report released by Citizens for Tax Justice shows that between 1995 and 2005, the IRS's budget was slashed by a fifth. Between 1995 and 2003, its enforcement division lost 36 percent of its staff. They were barred from conducting research on tax evasion, which meant they lost the ability to keep up with new tricks that accountants had discovered to game the tax code. More bizarrely, audits of the poor increased, through a special program meant to ferret out Earned Income Tax Credit fraud, but audits of people making more than $100,000 fell from 210,000 in 1996 to 92,000 in 2001—despite the fact that there were 80 percent more income filings over $100,000.
No one likes being audited, of course. But no one likes paying unnecessarily high taxes, either. And enforcement does work. Eric Toder, a tax-policy expert at the Urban Institute, says that each dollar spent on IRS agents returns about four or five dollars in recovered taxes.
There's a good argument to be had over whether taxes should be higher or lower. But everyone agrees they should be fair. When they're not, it raises taxes for those willing to pay them and increases the sense that the system is rigged. We can do better, but first we'll need some agents.