WASHINGTON – The chairman of the Taxation Section of the American Bar Association on Thursday is urging Congress to increase funding to the Internal Revenue Service, which has been hampered by significant budget cuts in recent years.
In identical three-page letters sent to House and Senate ranking and minority leaders of appropriations and other committees, George C. Howell, III pressed for an increase in appropriations for the IRS for fiscal 2017, which begins on Oct. 1, as well as for subsequent years.
The letter comes after Rebecca Harrigal, director of the IRS' tax-exempt bond office, said that audits of muni bonds are down significantly because of cuts in resources for her office. She told bond lawyers meeting here on March 10 that her office is expected to lose seven employees this calendar year, and another three during the fiscal year, bringing total staff close to 60 people. She noted that while TEB completed about 1,000 examinations of muni bonds three years ago, it only completed 568 last year, about the same name expected for 2016.
Howell thanked Congress for a $290 million funding increase for the IRS for fiscal 2016, but said the IRS' budget is still roughly $1 billion below its fiscal 2010 level.
Without a further increase in funding, he warned, the IRS will be at risk for less tax revenue, reduced staff and program cuts, including programs for elderly and low income taxpayers. Vacant positions will not be able to be filled, he said, adding that only 38% of the more than 100 million phone calls to the IRS last year were answered.
"We … urge Congress to provide the [IRS] appropriate and adequate funding so that it can fulfill its core functions of providing taxpayer service and collecting taxes properly due," Howell wrote. "We believe that failure to do so will harm taxpayers and erode confidence in our voluntary compliance tax system."
In fiscal 2015, only $10.9 billion was appropriated for the IRS, a $1.2 billion, or 10% drop from the level appropriated in 2010. Over that five-year span, the IRS lost roughly 15,000 full-time employees through attrition.
He argued the IRS would not be able to enforce new laws passed in Congress that he called "complex," including the Foreign Account Tax Compliance Act and the Affordable Care Act.
Howell said IRS funding is one of only a few government expenditures to provide both an immediate monetary return and a long-term benefit to the tax system.
"Each dollar spent on enforcement produces several dollars of additional tax collections," Howell wrote, adding that the federal government would further struggle to fund itself without this revenue.
Howell's letter follows a similar letter written by seven former IRS commissioners in November, which also warned House and Senate members that proposed budget cuts proposed for fiscal 2016 harmed tax enforcement and taxpayer assistance. That letter came as the House and Senate appropriations committee proposed cuts of $838 million and $470 million below the $10.9 billion enacted level for fiscal 2015.
