Government and Politics Issues

NCPA Study: Can The IRS Be Reformed?

In response to fresh evidence of abused taxpayers and mismanagement, Congress is considering reform of the Internal Revenue Service. Analysts are skeptical, since the IRS has always denied having tax collection quotas for agents -- and has always claimed it can collect more taxes if given more money.

  • But in 1981, with a budget of $2.5 billion, the IRS spent just 41 cents for every $100 collected.

  • Today, with a budget of more than $7 billion, it costs the IRS 49 cents to collect every $100 of taxes.

  • Further, according to the IRS's own figures, it costs taxpayers $8.67 just to pay $100 in taxes -- a hidden, added tax of 8.7 percent.

The IRS employs more than 100,000 people -- an increase of more than one-third since 1980. Yet despite the massive increase in resources over the last 15 years, the amount of money the IRS says it is not collecting has only risen.

  • In 1982, the IRS estimated the "tax gap" for individuals at $51.9 billion.

  • By 1992, the latest year available, it virtually doubled to $95.3 billion.

Of course, for decades congresses and administrations have pressured the IRS to collect more revenue. But since the IRS can only audit a small number of taxpayers -- last year it examined just 1.63 percent of returns -- it must depend on intimidation and fear to ensure "voluntary" compliance with the tax laws.

To protect taxpayers against IRS abuses, the House of Representatives has passed a Taxpayer Bill of Rights that is expected to clear the Senate early next year. It would change the burden of proof in tax court cases, award civil damages to taxpayers abused by IRS employees and extend the privilege of confidentiality to accountants and other nonlawyer tax advisers.

However, Congress has attempted to get control of the agency before, by passing a Taxpayer Bill of Rights in 1988 and another Taxpayer Bill of Rights in 1996. Neither has worked. As long as the tax code is so complicated and the tax burden so high, say observers, it is going to be harder and more costly for the IRS to compel compliance.

Source: Bruce Bartlett, "Can the IRS Be Reformed?" Brief Analysis No. 250, December 3, 1997, National Center for Policy Analysis, 12655 N. Central Expressway, Suite 720, Dallas, TX 75251, (972) 386-6272.

For Text: http://www.ncpa.org/ba/ba250.html

Home | Support Us | All Issues | Social Security | Debate Central | Contact Us

Dallas Headquarters: 12770 Coit Rd., Suite 800 - Dallas, TX 75251-1339 - 972/386-6272 - Fax 972/386-0924
Washington Office: 601 Pennsylvania Ave. NW, Suite 900 South Building - Washington, DC 20004 - 202/220-3082 - Fax 202/220-3096
© 2001 NCPA