Stoneage Ramblings

By John R. Stone

The Internal Revenue Service is the agency everyone likes to hate, it doesn’t get much love.

The agency is responsible for collecting taxes under a tax code and rate system created by Congress. In theory the revenue it collects funds the U.S. government. Only it doesn’t completely.

Congress underfunds the IRS, which is popular to do. It then borrows the money that the IRS can’t collect plus the money Congress  overspends. That creates what is now a $34 trillion national debt.

The IRS budget stayed about the same from 2013 to 2022 at about $14 billion. At the end of 2022 the agency had 78,661 employees, that compares with 114,628 in 1991. During that time, of course, the population of the United States increased. In 1991 there were 457 IRS employees per million residents, by 2021 that number was 237.

Also at the same time personal computers became widely available and things like electronic filing of returns started to increase. Even so IRS technology has not always kept up with the changes. In 2022 the IRS had 21 million returns that had to be keystroked into the system by hand! It did not have a scanning system for those returns.

Confusing this issue more, as if it needed it, is that as of 2021 the IRS had 52,000 employees who would be eligible for retirement between then and 2027. That was 65% of the work force!

The bulk of taxes are paid by people with high incomes. The top one percent of incomes pay just over 40 percent of the total income tax revenue.  The top half of incomes pay 92 percent of income taxes. These returns take experienced auditors to evaluate but over the years as experienced auditors left the IRS and could not be replaced for budget reasons, the enforcement staff of the IRS went from 50,000 people to 35,000 people.

Not all issues with returns are people trying to cheat. There can be a lot of difference in how different laws regarding what is taxed and what is not are interpreted. Businesses have whole departments that deal with doing business in a way that is most tax efficient. So there are a lot of issues brought up that need to be addressed and resolved by the IRS.

But even asking a question about an issue is nearly impossible due to IRS staffing levels. It can literally take months to get a letter reply. And good luck trying to talk to someone on the phone.

In 2012, 40,965 returns were audited for people who made over $1 million. In 2020 that number fell to 11,331 of the 617,505 returns for that income level submitted that year.

Lower enforcement also means fewer non-filing issues are being investigated. Between 2017 and 2021 nearly 1.4 million wealthy people filed no returns at all.

As a result of these many issues the IRS said in 2021 that it felt there was $668 billion in tax revenue due under existing law that was not paid just for 2021!

And there are those who simply choose to cheat one way or another. In 2023, the IRS initiated 2,676 criminal prosecutions for $37.1 billion in tax and financial crimes with an 88 percent success rate.

Under recent legislation the IRS was given $80 billion in funding spread out over 10 years to address its issues. Now some conservatives in Congress want to eliminate $20 billion of that as part of a renegotiated budget deal supposedly to take place sometime in March. That budget deal is for a year that began Oct. 1, 2023!

Nobody wants to see IRS goons running around beating people over the head for tax revenue. Yet if a system is to be fair someone needs to check and make sure the rules are being followed.

If the IRS statement that billions are not being collected because of underfunding is correct, it would seem we could reduce our deficits significantly if people just paid what they owed.