OK, it may be a stretch of a metaphor to compare the IRS to the Light Brigade, but I’m starting to worry the IRS is doomed.
Late last week, the IRS issued a new estimate of the tax gap based on the 2006 tax year. The tax gap is the amount of tax liability owed by taxpayers that is not paid on time.
This is the first full update of the numbers in five years. Looking at the raw numbers – the gross tax gap – the tax gap grew from $345 billion in 2001 to $450 billion in 2006. To my simple mind, this is growth – and not in a good way – of more than a hundred billion bucks. But according to the IRS, this represents no change at all: “On a relative basis, the tax gap is largely in line with the growth in total tax liabilities. In addition, some growth in the tax gap estimate is attributed to better data and improved estimation methods.”
I’m not sure I’m buying the IRS’s spin here. But even if you do, things are certainly not getting better when it comes to tax collection. But that’s not necessarily the IRS’s fault.
The same day it released the tax gap numbers, the IRS issued a fact sheet outlining all the great new initiatives it has launched to address the tax gap. And to be fair to the IRS, these new initiatives need to have some time to see if they work. And the IRS needs the resources to make them work.
So, why do I think the IRS is spinning? Because I think the agency is petrified about how some members of Congress will react to these numbers. When it comes to Congress, the IRS wants as little limelight as possible right now.
Why?
The IRS is fully aware that there are politicians who would like to do as much damage to it as they can by slashing its budget. It may seem counter-intuitive that a growing tax gap would give some lawmakers further justification for cutting IRS resources, but, hey, this is Washington.These politicians think that damaging the IRS is a great way to starve the beast. I think it’s more like burning your crops and starving yourself.
Like the IRS or not, it is an important and necessary agency. As we know, it collects the revenue to run the government. And despite the tax gap and that it is such an easy entity for politicians to demonize, it does a pretty good job at bringing in the money that funds the services we seem to want. Under the tax system we currently have, limiting the IRS’s ability to do its job is, in the finest light that I can put it in, short sighted.
In the end, it was the decisions of fools that decimated the Light Brigade. Maybe it’s not such a big stretch of a metaphor after all.
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