The Internal Revenue Service would face a “devastating” loss of $4 billion in revenue collected each year if proposed cuts of up to $600 million are made from the agency’s budget, Colleen Kelley, president of the National Treasury Employees Union warned Wednesday.
While the cuts might mean savings on the front end, they would result in far less money available for every federal agency the public depends on for services, she said, including responsible for the health and safety of the public.
“It’s hard to think of anything that’s more stupid than cutting the IRS enforcement budget.” – Charles Rossotti
The Food and Drug Administration, Social Security Administration, the Veterans Affairs Department, the Department of Homeland Security would likely be affected, Kelley said.
“There’s very little thought given to ‘what if’ there’s no money for school-funding or FDA money to inspect foods coming into this country,” Kelley said in a conference call with reporters. “Those agencies are funded 93 percent by money brought into the government by the IRS. Most American citizens are not thinking about what would happen if there is less money for the agency they depend on.”
The proposed cuts are still working their way through Congress, and experts are beginning to weigh in on what it really means. The IRS 2011 budget is $12.1 billion.
IRS Commissioner Doug Shulman and other IRS officials have said budget cuts would hurt their ability to close the tax gap – the difference between what taxpayers owe and what they pay. The agency estimated that the tax gap stood at $345 billion for 2001.
“It’s hard to think of anything that’s more stupid than cutting the IRS enforcement budget,” former IRS Commissioner Charles Rossotti (1997-2002) told the publication, Tax Analysts. “If you were a business that had a cash problem where it was losing money, would the first thing to do be to cut the collections function? No business would do that.”
Sen. Dick Durbin, D-Ill., said the congressional action cutting the IRS budget, is “penny-wise and pound-foolish because giving them the resources leads to collections that more than pays for those resources.”
Kelley said the NTEU is blasting out the message that the crippling loss of revenue collected each year by the IRS would drop dramatically. For every dollar the IRS spends on enforcement, it collects at least $7.
“It makes no sense to eliminate this one source of revenue,” Kelley said.
The cuts would result in 4,000 IRSs lost jobs from an already shrunken workforce. In 1995, the IRS staff numbered 114,000. Today, it is 94,000.
This staff loss will have a direct impact on taxpayers and the IRS customer service. It’s estimated that only one out of every two taxpayers would be able to reach the IRS help lines.
The Obama administration has come out in support of increased funding, proposing $1.9 billion for enforcement. The NTEU is now urging Congress to consider the unique situation of the IRS.
“For the sake of the country, we think this is a critical issue,” Kelley said. “We have to figure out how to get the IRS funded.”