Good Evening
Good Evening

Look! Suddenly Republicans don’t hate the IRS

The exterior of the Internal Revenue Service (IRS)

The exterior of the Internal Revenue Service (IRS) building in Washington. Credit: AP / Susan Walsh

Big legislation passes Congress, creating new responsibilities for the Internal Revenue Service. Congressional conservatives have a simple answer: slash spending for the agency to cripple a new measure they couldn’t defeat.

That’s what happened seven years ago after enactment of the Affordable Care Act.

Now those IRS bashers now are trying to undo the damage they caused in support of another piece of legislation: the Republican tax cut. That’s because the under-resourced IRS they helped create might imperil public confidence in their complicated and poorly drafted measure.

President Donald Trump’s 2019 budget, released on Monday, calls for $11.1 billion in base funding for the IRS, a slight decline. But it also calls for additional funding of as much as $15 billion over 10 years to strengthen enforcement of the tax law. That’s a backdoor way of strengthening the agency without incurring the wrath of conservatives.

The right’s hatred of the IRS is longstanding and has even included calls for its abolition. Conservative hostility intensified with the success of the Tea Party after the bank bailouts enacted during the financial crisis. Then came the passage of Obamacare followed by a scandal involving the largely bogus charge that the agency targeted conservative groups under President Barack Obama.

Since 2010, Congress has cut the IRS budget by $900 million, or, after adjusting for inflation, 17 percent. The agency now has fewer than 80,000 employees, down from over 100,000 before the cutting began. Technology has deteriorated and there are thousands fewer investigators, auditors and information-services personnel. Audits are down sharply, and at one stage as many as two-thirds of taxpayer inquires went unanswered due to limited resources.

The effect, according John Koskinen, who served as IRS commissioner from 2013 until last November, was to miss the intended target.

“They wanted to punish the IRS,” he said in an interview last week. “Instead they punished taxpayers and rewarded tax cheats.”

It’s been a budget loser, too. It’s estimated that for every dollar spent on audits and enforcement, the IRS returns from $5 to $10. “We’re leaving $6 billion to $8 billion on the table,” Koskinen said.

Treasury Secretary Steven Mnuchin, who had an undistinguished first year, is in charge of the IRS; its hollowing out is one problem he grasped, fending off even larger cutbacks proposed by others in the Trump administration.

The tax law has given him new ammunition. The IRS will be flooded with questions about the new law, and will be required to upgrade its aging technology and rewrite the Internal Revenue Code to reflect vast changes that go into effect this year under the tax overhaul signed in December.

“Despite the claims of simplification, the new law adds a myriad of complications,” said Mark Mazur, who runs the nonpartisan Tax Policy Center. “There will be a lot of difficult stuff.”

For example, he said, the IRS will have to interpret imprecise legislative language that will encourage many individuals and businesses to claim tax breaks intended to benefit partnerships, sole proprietorships and limited-liability companies.

Republicans, who fear that chaos and confusion could make their tax overhaul politically unpopular, are working on rationalizations to support a beefed-up IRS. Senate Majority Whip John Cornyn, for example, is pairing openness to more IRS resources with criticism of the agency for having been “more of an adversary than a help,” though he hasn’t said how. House Ways and Means Committee Chairman Kevin Brady, says boosting the IRS budget might be justified by the nomination of a new commissioner, a California tax lawyer named Charles Rettig who, unlike Koskinen, has no managerial experience.

For Democrats, it’s no doubt fun to watch Republicans squirm after all the problems they caused, and the Democrats will try to exact a price. But the IRS needs more money and manpower.

Albert R. Hunt is a Bloomberg View columnist. He was the executive editor of Bloomberg News, before which he was a reporter, bureau chief and executive Washington editor at the Wall Street Journal.