Libertarians and conservatives who would like to dismantle or further restrain the Internal Revenue Service are not likely to applaud, but Donald Trump’s nominee for Treasury Secretary has been making the case for beefing up the agency and exempting it from the federal hiring freeze the president just put in place.
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As William Gale, co-director of the Urban-Brookings Tax Policy Center, points out in an op-ed Tuesday, Steve Mnuchin has a sizeable argument for giving the IRS more firepower: Some $510 billion of taxes were not paid in 2016.
“To put that in perspective,” Gale writes, “that’s almost as large as the entire federal budget deficit – $587 billion in 2016.”
At his confirmation hearing before the Senate Finance Committee on Jan. 19, Mnuchin called for modernizing the IRS by upgrading its technology and adding staff. The former Goldman Sachs banker and Hollywood financier, who turned the failing bank IndyMac into the successful One West, said he would use his “expertise to bring the IRS up to date.”
On the campaign trail last year, GOP presidential candidate Senator Ted Cruz of Texas talked about abolishing the IRS, and House Speaker Paul Ryan’s tax blueprint would “streamline” the tax collector. In Washington parlance, “streamline” often means reducing resources and cutting staff.
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But as Gale suggests, one of the reasons the IRS is not doing a better job of beating the bushes for tax cheats is that, “Adjusted for inflation, IRS funding in 2016 was the same as in 1998. As a result, IRS employment has fallen about 27 percent – by 30,000 workers – since then.”
Bloomberg says that the IRS budget for 2016 was “about $900 million less than its budget for fiscal year 2011, according to a report last year from the Government Accountability Office.”
By Gale’s calculations, “the IRS audited only 0.8 percent of individual and 1.3 percent of corporate returns” in 2015. That compares “with 1.1 and 1.4 percent, respectively, in 2010 and 1 and 2.1 percent, respectively, in 1998,” he writes. “The audit rate for households with income over $1 million has fallen by 40 percent since 2010.”
At the same time that its resources and staff have been reduced, Gales says that “the number of individual tax returns has increased by a third — from 123 million in 1998 to 163 million in 2015.”
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Mnuchin may get a chance to make the IRS a more efficient money machine, but perhaps not right away: Democrats boycotted a Senate Finance Committee vote on his nomination Tuesday as part of a larger protest against Trump on the Hill that also sidelined the nominations of Senator Jeff Sessions for Attorney General and Representative Tom Prices for Health & Human Services Secretary.
