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Saturday, February 11, 2012

IRS not adequately funded to meet its mission

In January, the IRS National Taxpayer Advocate released the annual report to Congress (IR-2012-6). I think the most serious issue identified in this report is shocking in light of the IRS mission. The IRS mission:

"Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all."

Here is the shocking excerpt from the NTA report (link to full report):
 Excerpt from 2011 Annual Report to Congress, page 2.

There are many reasons for this problem. The key one though is the growing complexity of the tax law. Congress continues to add more special rules including many that are temporary with varying effective dates.

Possible solutions:
  • When new provisions are added to the tax law, additional funding should be given to the IRS unless the new provision replaces existing provisions.
  • Reduce complexity by reducing the number of special tax rules, such as by consolidating some (such as the education incentives and the child credit and dependency exemption), and eliminating ones that have no justification such as the deduction for interest on a second home.
  • Upon the third time that a temporary provision is examined for renewal, require that it either be made permanent or allowed to expire.
  • Improve the IRS use of technology (it is getting better, but not yet at what people have come to expect from the private sector).
What do you think?

1 comment:

Edward Bryant said...

It's hard to disagree with these recommendations but the main problem is that they don't seem very likely when you look at the incentives and disincentives for legislators. In other words, these ideas don't have much of a constituency outside of the IRS. Further, the funding and temporary rule extension ideas would involve legislators limiting their own power, which is unlikely and often ineffectual because legislators can ignore their own self-imposed limitations at will (issue similar to why balance budget laws are meaningless unless in the form of a constitutional amendment).