Boyle: the IRS Has to Be Adequately Funded, and Here’s Why.

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The IRS is the federal agency that taxpayers “love to despise,” yet starving it to death is bad for the country. The Biden administration’s Build Back Better legislation, which contains much-needed IRS money, is now in jeopardy. The president has committed to craft a bill that can be passed by Congress. This funding must be authorised immediately. Otherwise, the IRS’s ability to conduct its job could be jeopardised.

Since 2010, funding for the IRS has reduced by 20%, but tax returns submitted have climbed by more than 13%. Meanwhile, the tax code becomes more complicated by the year, experienced IRS workers retire and are not replaced, and COVID-related duties — such as sending out millions of stimulus payments and monthly child care allowances — have pushed the IRS to its limit.

There are various reasons why the IRS is underfunded and understaffed. First, the IRS, which is already grappling with a backlog of millions of unprocessed returns and taxpayer correspondence, received 280 million calls in 2021, just 11 percent of which were answered. Taxpayers need and are entitled to superior customer service, particularly when it comes to appropriately submitting tax forms.

 

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Second, IRS research have revealed widespread tax avoidance. The so-called “tax gap,” or the difference between legally owed but unpaid taxes, is estimated to be $600 billion each year and expanding. Over the next ten years, the total “tax gap” will be a mind-boggling $7 trillion.

This tax evasion is primarily committed by high-income taxpayers, mainly through organisations established as partnerships or sole proprietorships, for which there is no “third party” reporting of money gained. This does not happen to lower and middle-income taxpayers who earn salaries, as well as maybe interest, dividends, and capital gains on securities trades, all of which are reported to the IRS and duly taxed.

As a result, the cheating contributes significantly to income and wealth disparity and results in an unfair tax system that imposes an unnecessary burden on lower-income taxpayers.

Only an IRS fully staffed with highly qualified revenue agents and outfitted with 21st century technology, including artificial intelligence, could potentially begin to close the “tax gap,” alleviating strain on the federal budget and the national debt.

The shrinkthetaxgap.com website, operated by two former IRS commissioners, a tax lawyer, and a former IRS associate chief information officer, contains a plethora of material on the “tax gap,” including thorough assessments of its origins and the steps that must be followed over time to eliminate it.

 

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Finally, a properly staffed and resourced IRS would contribute to the restoration of trust in government. Numerous surveys have found that a growing proportion of the public has lost faith in the government’s ability to tackle everyday concerns. The IRS is a big deal for most individuals.

The IRS, which is in charge of collecting all of the income needed to fund the government, is the most significant and, in many cases, the only agency with which the average citizen must contact on an annual basis.

An IRS that delivers thorough, fast, and professional assistance to taxpayers while increasing revenues by minimising cheating by upper-income taxpayers would greatly boost public trust.

Aside from enhancing customer service, adequately paying the IRS will generate significant income for a variety of national expenditure priorities. The Congressional Budget Office, Congress’ official scorekeeper, estimated that supporting the IRS will generate hundreds of billions of dollars in income over a ten-year period that exceeds the cost of strengthening the IRS through recruiting, training, and technology implementation.

That’s the kind of investment I can support as a businessman.

 

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It should not be a partisan issue to properly support the IRS. Let us make certain that the administration’s proposals to support the IRS are included in whatever shape the Build Back legislation takes. Tax enforcement will take time to improve, but taxpayers need and deserve an IRS that works for them, not against them. And if that happens, perhaps they will no longer despise it.

 

 

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