Bleeding the IRS Will Make the Tax System Worse

The budget deficit will grow, taxpayers won't get answers, and the rich will get off easier.

Rick Wilking/Reuters

The "Cromnibus" spending bill enacted last week has received its share of brickbats, mostly over the Citigroup-written and Representative Kevin Yoder-instigated provision giving banks taxpayer protection for derivatives trading. Others have been a reply to the campaign-finance provision blowing up most of what was left of campaign contribution limits, pushed by Mitch McConnell but also apparently crafted by Democratic campaign lawyer Mark Elias. Another awful provision got much less attention but is deeply destructive—the successful move by Republicans, including Senator Ron Johnson and Representative Ander Crenshaw, to cut $350 million from the IRS budget, following other cuts this year totaling $1 billion or more that have forced the IRS to cut 13,000 employees while it faces a much heavier workload from 7 million additional taxpayers.

Why these moves? One part is strategic—another in the series of guerrilla actions by congressional Republicans to destroy the Affordable Care Act while avoiding the once-standard tactic of working to improve the law's policies or coming up with an alternative. Another part is just punitive, trying to cause deep pain to an agency that, in the eyes of GOP lawmakers, took off after conservative groups trying to register as 501(c)(4) nonprofits, and held a few expensive conferences. As Representative Peter Roskam, who should know better, told Politico, "This is an agency that [had the] wherewithal to make mock videos and to have lavish gatherings .... I don't think it's credible for them to say they don't have enough."

Take out the "lavish gatherings," and you can save, what—$2 million? $10 million? Great reason to cut $1.35 billion! Here is the reality. Cutting the Internal Revenue Service will result in a serious drop in revenue—fewer audits, less oversight, with many studies showing that additional funding for the agency has always resulted in a sixfold or greater increase in federal revenues without changing the law to increase taxes. That will worsen our federal budget deficits. At the same time, fewer personnel will mean many fewer taxpayers reaching the IRS to get answers to questions, more delays in processing returns and refunds, a much rougher tax season, and lots of pain for individuals.

It would be easy to see this as a plot by radical antigovernment nihilists to create even more anger at government, with the IRS as a perennial punching bag reaching new heights as a target. Or maybe this is a conspiracy to benefit the richest among us, who already have the advantage of being able to hire the best and brightest lawyers and accountants to find ways to evade taxes—and now will encounter even less resistance to their schemes and many fewer problems with audits.

But let's be more generous, and say that the perpetrators are lashing out at an agency run by one of the best and most respected administrators to grace government in decades, John Koskinen, without fully appreciating the ramifications.

The Partnership for Public Service recently came out with its annual rankings of government employees' satisfaction by department, agency, and bureau. The ratings overall are down (more about that below). The IRS ranks 163rd among sub-components of agencies and departments (it is a unit in the Treasury Department). Why? Here are a few reasons: A stressed and undermanned staff of accountants and tax attorneys who have to do battle with private counterparts who make three, 10, or 100 times what they do, who know that tax collectors are never popular, now have to face deeper budget cuts, more strain, more politically driven attacks, more pay freezes, and no ability to keep up with advances in their field because any conferences or meetings will be ripped in "oversight" hearings by Roskam, Crenshaw, and Johnson, among others.

The partnership survey shows growing dissatisfaction across most federal agencies. That is coupled with another grim reality, highlighted earlier this week by Lisa Rein in The Washington Post, in a story headlined, "Millennials Exit the Federal Workforce as Government Jobs Lose Their Allure." The problem here is not just the budget cuts, budget uncertainty, sequester pain, and shutdown threats and reality; it is also a continuing, broken recruitment process that takes smart, talented young people motivated to try public service and throws obstacle after obstacle in their way. Some of this is built into the law, while much comes from failures in the executive branch to streamline and modernize recruitment and retention.

The problem is not just getting young people to come into the government or to stay, but also replacing the most important senior managers in the Senior Executive Service, who are overwhelmingly Baby Boomers on the verge of retirement. These government service crises have broad and deep implications.

Except for the hardiest nihilists in Congress (of whom there are more than a few), there has to be some recognition that protecting against cyberattacks, combating terrorists, protecting our borders, thwarting Ebola or other potential epidemics, doing vital medical research to combat Alzheimer's and cancer, and collecting the revenue that pays for these tasks among other vital ones requires having talented people staffing the agencies responsible for them. But with the current zeal to blow up government, drain its coffers, thwart President Obama at every turn, and use the budget process to wreak havoc on efforts to manage federal agencies and plan ahead, the perpetrators of this approach are damaging all of government, including the departments and agencies that most of us would see as vital.

There used to be a web of Democrats and Republicans who understood these issues and provided some safety net against the most mindless attacks. But with John Warner and Tom Davis retired and Frank Wolf soon to join them, the Republicans who care about government employees and see them in the context outlined above are nearly all outside of Congress looking in. The lawmakers in the anti-IRS squad will no doubt get kudos from their colleagues and their constituents; there is no price to be paid beating up on the tax collectors. But at some point, we will all pay a heavy price for the government-bashing.