The real IRS scandal
For more than a year now, the conservative outrage machine has had its sights squarely on the Internal Revenue Service. I mean, among other things; the conservative outrage machine is an accomplished multi-tasker, so the IRS has had to compete with Benghazi and Fast and Furious and the machine's continuing surprise that a U.S. president enjoys golf.
The IRS scandal goes like this: The IRS applied extra scrutiny to an explosion of supposed tax-exempt groups starting in about 2010. The scrutiny was applied to both liberal and conservative groups, but the conservative groups complained that they were being unfairly targeted. To date, only one group, identified as a Democratic or liberal group, had its tax-exempt status revoked, although to be fair, the delays suffered by all those groups, including the conservative ones, were unreasonable. But I'll come back to that in a moment.
When this story broke in 2013, the conservative outrage machine then insisted that all those groups that were stalled by the IRS might have changed the outcome of the 2012 election. This is self-refuting logic, of course; if the groups were eligible for tax-exemption, they could not have been political or affected the election, and if they were political, they should have gotten the higher scrutiny and been denied tax-exempt status.
And to complicate things, we learned in June that some of the emails from the then-head of the IRS Exempt Organizations division, Lois Lerner, were missing, because her computer crashed and was unrecoverable. That would sound really, really suspicious -- and the conservative outrage machine has been in tremendously high dudgeon about it -- if that crash hadn't happened in 2011.
The "scandal" came to light two years later, and contemporaneous documentation shows that Lerner was really quite upset about the crash and tried everything to get the data back. Really, these missing emails are nothing but a convenient way to extend this fake "scandal" a little longer and get Paul Ryan some pre-2016 cred with the Tea Party crowd. But the conservative outrage machine theory is that some smoking gun was among those lost emails; I think they expect a "Hey, Lois, can you take down the Tea Party for me? Thanks, Barack" email to be in there somewhere. That's ridiculous, of course, but the conservative outrage machine is nothing if not consistently ridiculous.
But, as the title of this post promises, there is an actual scandal at the IRS, and it's not this one.
It is instead the fact that the IRS has been, for lack of a better word, decimated over the last several decades, and it is now simply unable to do its job effectively. The whole country has suffered as a result -- and not just the tax-exempt applicants who faced long delays in 2011 and 2012 when an under-staffed unit couldn't process their applications fast enough.
Decimated is not much of an exaggeration: According to the IRS Oversight Board's most recent report (pdf), covering 2013, "Due to funding limitations, the IRS implemented exception-only hiring freezes and employee buyouts. These efforts, as well as normal attrition, have reduced the IRS workforce by approximately 7,500 full-time equivalent positions, or nine percent, since 2011." It's worse the longer out you look; Forbes reported last year, "IRS staffing has decreased to 91,000 in 2012, down from 114,000 in 1995, a drop of about 20 percent."
Because no one likes the IRS, it is an easy target for Congress, which is funding the IRS right now at a lower real-dollar amount than in 2009, and with almost a billion fewer inflation-adjusted dollars than they did in 1995.
The shortfall manifests in lots of ways. Eerily prescient considering the current hobbyhorse of the conservative outrage machine, the IRSOB's report says the agency has a $700 million technology budget shortfall, for example. Plus, there were those long wait times at the Exempt Organizations division, not to mention increasingly long wait times for contacting the IRS in general.
But perhaps the biggest casualty of the budget-cutting is federal budget itself.
The federal budget deficit is, right now, lower than it has been since 2008 (even if people don't believe that) at about $680 billion. That's a lot of money! But consider that the IRS Oversight Board's most recent calculation of the "tax gap"-- that is, the difference between what is legally owed by US taxpayers and what the IRS collects -- is at least $390 billion, meaning more than half the total budget deficit is because the IRS cannot collect money it is legally owed by US taxpayers.
The "tax gap" is not the only data in which you can see the underfunding and understaffing in action; enforcement efforts have been falling for years. In its 2013 report, the IRS Oversight Board notes that the percentage of returns selected for examination (i.e., an audit) was at its lowest point since 2006, again because of understaffing: "At the end of 2013, the number of revenue officers was the lowest in at least 10 years; the number of revenue agents was the lowest in nine years," the report says.
And "revenue generated from audits declined almost $400 million to $9.83 billion, less than $10 billion for the first time since at least 2003." The agency also currently has its lowest rate of liens, levies and seizures in the last decade.
I know what you're thinking, and it's probably along the lines of "Way to go, people! You're beating the system!" Yeah, yeah, everyone hates the IRS. I get it. But the IRS is also a very, very necessary evil. There is no other mechanism in place to collect the revenue that keeps this country running.
This underfunding and understaffing is nothing short of scandalous--and a real scandal, not some on-purpose half-literate misreading of Lois Lerner's emails. It is scandalous that our country and our country's leaders are perfectly willing to leave hundreds of billions of unpaid tax dollars on the table every year rather than spend a billion or two more on the agency that could find and collect that money. It is scandalous that the sentiment I imagined you thinking in the last paragraph, that tax-cheats are the heroes here and the IRS the villain, is so common.
Most importantly, it is superbly scandalous, in particular, that the United States Congress is deliberately knee-capping this country's only tax-collection agency out of spite or on the theory that no one cares and then at the same time blasting the IRS for not being able to do its job. That's just cruel and incredibly stupid.
Jay, I want you to throw your computer in the bottom of the lake. Now are your emails gone? Nope! They're kept on a server not on the actual computer! 2. I'm going to bust you for plagiarism. You're basically just regurgitating that huffington post, NY Times, Jon Stewart and Salon said already not coming up with original work.
Hahaha. The "conservative outrage machine". At least the right side of the aisle has their sights set on things that matter, like the backbone of the American economy and real dollars and cents. The "liberal outrage machine" is more focused on things like NFL football team names, the word bossy, and pretending to care about wage inequality.
As a CPA I get to deal with the good folks at the IRS all the time. A primary reason that revenues from audits are done has been the explosion of electronic filing and in third party reporting that is provided to the IRS. In other words, it's much harder to cheat the system so to speak and while the IRS still audits there isn't as much of a need to do so. The concept of a cash business like a restaurant or a bar has largely gone by the wayside as more and more people pay with credit cards (You have to wonder about the ones who will only accept cash). Would it be worthwhile to audit someone like the author of this article? Probably not, because the IRS probably knows 95% of everything that should be on his tax return to begin with. Should they waste time trying to quibble about some Goodwill donations that might be overstated? So now the average tax cheat is down to overstating their deductions. While I'm sure some people still take their liberties I'm always surprised by how many business owners turn down legitimate tax deductions because "they don't want to wave a red flag" One other point. The IRS and the State of Wisconsin expect taxpayers, especially businesses, to keep meticulous records for 7 years. Good luck telling them that your computer crashed if you get audited,
Kids do your homework and question bureaucrats .
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