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President Trump released his budget blueprint this week. The proposal calls for increases in military spending and immigration enforcement (including billions for the wall) while slashing budgets for other agencies, including the State Department and, of course, the Internal Revenue Service (IRS).
You can check out the budget blueprint here (downloads as a pdf).
Under the proposal, the President anticipates "that the IRS could continue to combat identity theft, prevent fraud, and reduce the deficit through the effective enforcement and administration of tax laws." That's with less money. And fewer people. The proposal also "shrinks the Federal workforce" by "redirecting resources away from duplicative policy offices to staff that manage the Nation’s finances."
In terms of numbers, that translates into a $239 million cut from last year's budget. It's a 2% haircut which could have been worse. The IRS has already been slogging through cut after cut over the past few years. The number of IRS staffers has dropped 31% over the past 19 years : it has plunged 16% just since 2005. The budget for the last fiscal year was $900 million less than its budget for the fiscal year 2011. This, despite the fact that Congress continues to up the agency's responsibilities.
The IRS is responsible for administering parts of the Affordable Care Act, or Obamacare. This isn't expected change drastically under the GOP plan which still calls for employer reporting of insurance on tax forms, as well as a system of tax credits (more on the GOP proposal here and where things stand here).
The IRS also plays a part in the new passport law passed by Congress. Under the new law, the State Department may yank or refuse to issue a passport if you are "seriously delinquent" on your tax obligations. Since the State Department doesn't have access to tax records, the IRS must compile a list of those affected taxpayers and certify the debt to the State Department. The IRS is also required to notify taxpayers in writing at the time that it certifies the debt (more on the passport law here).
The IRS is also tasked with enforcing parts of the Banking Secrecy Act (BSA), especially those focusing on offshore tax compliance. Those FBARs you've heard about? Those are tax forms used to report bank, securities, or other financial accounts in a foreign country. That's part of what the IRS monitors as part of its compliance efforts (more on those here).
The IRS also has a criminal investigation team, sometimes called IRS-CI, which investigates everything from tax preparer fraud to political corruption to terrorism. Those IRS scam phone calls and subsequent arrests? Also IRS-CI (more on IRS-CI here).
And of course, the IRS collects the dollars that keep the lights on. The IRS brings in about 92% of all federal revenue , according to IRS Commissioner John Koskinen. Last year, Koskinen noted that the IRS collects $100 for every 35 cents in costs, a return on investment he called "a pretty good deal for the American people." That level of efficiency is better than most countries, said Koskinen, citing statistics from the Organization for Economic Cooperation and Development which indicate that the average OECD member country, including Germany, France, the United Kingdom, Canada and Australia, spends almost twice as much as the U.S. to collect each dollar of revenue.
Still, the President has called for more cuts. And Congress is inclined to support more cuts.
So with all of that support, why weren't the cuts worse? The IRS may have Secretary of Treasury Steven Mnuchin to thank. At his confirmation hearing, Mnuchin said that, as Treasury Secretary, he would prioritize increasing IRS staff, saying about previous staffing cuts, "I don't think there's any other government agency that has gone down 30%, and especially for an agency that collects revenues, this is something that I'm concerned about." Mnuchin suggested at the time that President Trump would not make staffing cuts, saying, "I can assure you that the president-elect understands the concept of 'we add people, we make money.' That’s a very quick conversation with Donald Trump."
(You can find out more about Mnuchin and what the Treasury Secretary does here.)
Mnuchin also said at his hearing that he wanted to make modernizing the IRS technology a priority, something that Koskinen supports. The IRS processes a lot of data. On the IRS' busiest day last filing season, IRS systems accepted 4.4 million tax returns in one day. That's nearly 450,000 returns accepted in one hour, or 125 returns every second. Modernization would not only help process that data - it would help keep that data safe, something that is increasingly a concern for the government and for taxpayers. The White House's proposal seems to want that, too. It appears that they're just not prepared to provide the funds to do it.
It's worth keeping in mind that this isn't a full budget - it's a "blueprint" (we're seeing a lot of that word this year). According to White House Budget Director Mick Mulvaney, a more complete budget will be presented in May.
