The voices of Tax Policy Center's researchers and staff
Yes, you heard that right. The time is perfect in this abysmal economic environment to beef up the IRS.
IRS audit resources have never fully recovered—in relation to the workload the IRS faces—from the IRS-bashing of the late 1990s. That’s too bad because IRS internal studies show each dollar spent on an additional examiner brings in on average 4 to 5 dollars of additional revenue. Fortifying enforcement would seem to be a “no-brainer” when we have a tax gap of at least $400 billion. (The last estimate, for tax year 2001, was a gap of $350 billion.)
But wait, you might say. Do we really want to bring in more tax revenue during a recession? Isn’t that exactly the wrong thing to do?
True, we don’t want to raise more revenue in a recession. Even squeezing it from tax cheats suppresses consumer spending just when we’re trying to raise it. But new agents wouldn’t become serious revenue raisers until the recession has run its course. In their first year, the IRS estimates, so-called revenue productivity will be very low because experienced auditors will be kept busy training the new examiners. And paying this new cadre will add to the economic stimulus. In a few years, the revenues will come rolling in and the new agents will more than pay for themselves. Then, with deficit reduction again a priority, we’ll be glad we have them and better able to make everyone pay what they owe.
This is a just a small proposal-- a drop in the bucket but also one that we can afford now and that will pay off later. You get the idea: spend money today for deficit reduction tomorrow.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.