NCPA - National Center for Policy Analysis

IRS Termed "Broken"

April 13, 2001

The chairman of the Internal Revenue Service Oversight Board says the agency is "broken" -- and that it "doesn't provide good service." Larry R. Levitan also added that the IRS "doesn't do adequate enforcement -- and that gives people the impression they can cheat."

A report by the board sparked some controversy over the agency's level of funding. The report said the agency was seriously underfinanced and called for an increase in its budget. But Treasury Secretary Paul H. O'Neill, who serves on the board, said the nearly 7 percent budget increase recommended by President Bush was adequate.

  • The New York Times claims that documents it obtained from an IRS source reveal that more than one million Americans owing taxes that are delinquent have had their files marked inactive -- meaning that the agency doesn't intend to follow up on collections.
  • For just last year, the decision effectively wrote off more than $2.5 billion in taxes owed by 668,018 taxpayers.
  • In 1998, by contrast, just 98 taxpayers had their cases sent to the inactive file.
  • The IRS defined the cases -- some involving as much as tens of thousands of dollars -- as too small to be worth going after, given its present resources.

Since 1992, the agency's staff has been reduced by one-sixth and enforcement actions have fallen by two-thirds for audits -- and by 99 percent for seizures of property to pay for back taxes.

Source: David Cay Johnston, "A Smaller IRS Gives Up on Billions in Back Taxes, New York Times, April 13, 2001.


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