Republicans face pressure to increase IRS funding to implement their new tax law, after years of imposing spending cuts and staff reductions at the tax collection agency.
IRS taxpayer advocate Nina Olson told Congress this week that the agency would need nearly half a billion dollars over the next two years to implement the major tax overhaul signed by President Trump. And Republicans, who for years have treated the IRS as an out-of-control bureaucracy in need of restraint, are listening.
“There’s no doubt that this is a once-in-a-generation challenge for the agency as well, so we want to make sure they can meet it,” said House Ways and Means Chairman Kevin Brady, a key player in the tax overhaul’s passage who has been a top critic of the IRS.
Added funding won’t be a given, the Texas congressman cautioned. Instead, the agency will need to demonstrate need.
Nevertheless, “Circumstances have changed at the IRS,” he said. In particular, the agency is now headed by Acting Commissioner David Kautter, a Trump appointee rather than an Obama holdover. And the agency under Kautter is supposed to provide recommendations for how it can free up resources for implementing the law without new funding.
Republicans are still demanding that the IRS do more with what it has. A representative for Republican Sen. Shelley Moore Capito of West Virginia, the chairwoman of the subcommittee responsible for IRS appropriations, said her “focus will be on how the IRS is using the resources they have and determining whether they have the capabilities to implement the law in a way that protects taxpayers.”
In her report to Congress, Olson agreed that the agency has to use its resources more efficiently. She also warned, though, that “the IRS absolutely needs more funding. It cannot answer the phone calls it currently receives, much less the phone calls it can expect to receive in light of tax reform, without adequate funding.”
Since taking control of the House in 2010, Republicans have cut IRS funding. The later disclosure that the agency targeted some Tea Party and conservative groups for heightened scrutiny in applying for nonprofit status only raised GOP animosity toward the the agency.
IRS spending fell from $12.3 billion in 2010 to $11.7 billion in 2016, not accounting for inflation, a rare instance of government agency funding decreasing. The number of full-time employees has dropped from about 95,000 to closer to 78,000 over the same period.
Those cuts are a victory for the Tea Party. But they’re now a possible liability for Republicans, who want the tax law rollout to go as smoothly as possible ahead of the 2018 midterm elections.
The problem is that customer service has deteriorated with the budget cuts. Taxpayers increasingly have a hard time getting an answer when they call in to the IRS with a problem. Today, only about 40 percent of calls are answered, Olson said.
About 400 employees are available to directly engage with taxpayers, according to Olson, a number that she suggested wouldn’t be sufficient to educate the public about the new tax law.
To roll out the law, she noted, new funding is needed to field the inevitable phone calls from taxpayers facing a new tax system, updating forms, revising regulations, training employees, and more.
The new law is expected to put the agency to the test, especially through complicated new provisions creating new tax regimes for noncorporate businesses and foreign earnings of multinational corporations.
Treasury Secretary Steven Mnuchin has expressed support for increased funding.
The ultimate determination of funding, though, will be made by Congress, which is debating the terms of government funding legislation to prevent a shutdown this month.
