The Spending Cuts That Actually Increase The Deficit

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"The Spending Cuts That Actually Increase The Deficit"

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Funding for the Internal Revenue Service (IRS) is lower than it was four years ago despite increased responsibilities, and staff has fallen by 8,000 people, according to a new report from the Government Accountability Office.

Appropriations for the IRS is below what it was in fiscal year 2009 and has declined by abut 6.6 percent since 2010. Staffing has fallen by 9 percent since 2009. This is mostly thanks to about $900 million in budget cuts that it’s had to absorb since 2010. Given that money disappeared as it took on an increased workload thanks to legislative mandates, such as work related to the Affordable Care Act, the GAO notes that “the resulting imbalance between service and demand has adversely affected operations.”

The cuts will mean more of a hassle for taxpayers, who are getting fewer services. Average wait times for people who call the IRS have nearly doubled since 2009, and the paper correspondence that it hasn’t responded to within 45 days has significantly increased. It also eliminated free return preparation and reduced services at walk in sites.

But the budget cuts will also have the perverse effect of increasing the deficit. The GAO report notes that enforcement staff has fallen from 50,000 people in 2010 to just over 40,000. The full-time staff working on international and offshore tax administration fell from 2,135 last year to 1,819 this year. It also had to put two major IT projects on hold. Reductions in enforcement and efficiency mean that it will bring in less tax revenue. Last year’s budget cuts were a big factor in a drop in revenue from enforcement measures of $5 billion. Every extra dollar spent on modernization, enforcement, and management systems reduces the deficit by $200, and every dollar spent on audits, liens, and seizing property in response to tax evasion brings in $10.

Reduced manpower is also costly. Every extra hour spent on corporate tax enforcement brings in more than $9,000 in revenue. The agency had to furlough tens of thousands of workers last year thanks to sequestration, but furloughing just 1,800 enforcement positions could mean missing out on $4.5 billion in revenue.

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