As the Internal Revenue Service (IRS) grapples with a shifting political landscape, particularly under a Republican-dominated Congress, the agency’s funding allocations are under intense scrutiny. Recent calls from the National Taxpayer Advocate, Erin Collins, emphasize the immediate need to prioritize taxpayer services and technological advancements over enforcement-based funding. In a recent annual report, Collins highlights what she perceives as an alarming disproportion in funding priorities under the Inflation Reduction Act, noting a diminished focus on the very services that facilitate taxpayer compliance and satisfaction.
The Inflation Reduction Act has inflated the IRS’s budget significantly, allocating approximately $78.9 billion. However, Collins pointed out that a staggering 58% of this funding is devoted to enforcement, while only a mere 4% is set aside for taxpayer services. This stark inequity raises questions about the future operations of the IRS and the experience of average taxpayers. As enforcement measures garner bipartisan contention, there seems to be a collective understanding among lawmakers about the necessity of bolstering taxpayer support systems—an understanding that could shape funding priorities moving forward.
Collins argues that with better funding dedicated to services and technology, taxpayer experiences could vastly improve. She underscores that an efficient and fair taxpayer service infrastructure could enhance compliance rates, potentially diminishing the reliance on stringent enforcement actions. Her rhetoric hinges on a central theme: a well-supported IRS that prioritizes taxpayer services will ultimately lead to better revenue collection outcomes. With the IRS reporting that only 2% of federal revenue results from enforcement actions, there is an evident case for shifting focus from punitive measures to supportive systems facilitating tax payments and returns.
The dynamic within Congress hints at potential changes that may affect IRS funding further. Republicans have previously demonstrated willingness to trim the IRS’s budget, with $20 billion in funding cuts already enacted following the 2023 budget negotiations. As costs continue to escalate post-pandemic, any reduction in IRS budget may carry substantial ramifications for its operational capacity, making it increasingly difficult to uphold quality taxpayer services and technological enhancements.
Collins warns against draconian cuts to services amid potential future reductions to enforcement funding. She emphasizes that indiscriminate austerity could lead to a regression in the quality of taxpayer interactions, inviting complications that would ripple through the entire tax system. Keeping a balanced approach in budgeting—one that does not sacrifice taxpayer services for enforcement—could alleviate many issues, leading to a more streamlined and effective IRS.
As the IRS stands at a crossroads regarding its funding, the voice of the National Taxpayer Advocate brings an essential perspective: investment in taxpayer services is not merely beneficial but critical for fostering an environment where compliance is encouraged through support rather than fear of punitive actions. This approach could, in fact, serve the interests of both taxpayers and the federal government alike.