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Can the IRS Save America?

You know what's easier than taxing new things? Collecting the taxes people should already be paying on old things. "People should follow the law" is not a huge argumentative lift. Which is why I'm glad to see this:

Treasury Secretary Tim Geithner has asked Congress to increase his agency's budget by 5.3 percent to $13.4 billion for 2010, according to testimony he is delivering today to a House panel.

Nearly half of the $676 million increase -- $332 million -- would go toward new IRS enforcement efforts, including the hiring of nearly 800 new agents to hunt down offshore tax-evaders, corporations and rich Americans, Geithner's testimony reads.

Over the past few decades, the IRS's budget has shrunk by more than 20 percent. Tax enforcement has dropped. And revenue has been lost. Some estimates put the money missed as high as $300 billion. Another study showed that every dollar spent on the IRS brought back four dollars in increased tax compliance (and some analyses show a $15 dollar return!). So we're not talking chump change.

Even if we didn't have a massive budget deficit, this would be a good investment. But given that we do have a massive budget deficit -- and those have consequences -- it's an even better investment. Start with the easy stuff. Save your energy for taxing health benefits.

By Ezra Klein  |  May 22, 2009; 10:00 AM ET
Categories:  Economic Policy  
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Comments

One of the main problems in collecting from medium & large businesses and high net worth individuals is the army of private tax lawyers these parties bring to the table. I've heard that enforcement staff are rewarded by the number of successful actions they bring, not the magnitude of the tax payments they collect in those actions. As a result, incentives skew towards bringing actions against less-wealthy parties. So not only should the IRS hire more agents & attorneys (as an aside, it's a great time to hire graduates of some of the top law schools), the agency should change its incentives to reward the magnitude of the tax payments collected.

Posted by: jmlaw | May 22, 2009 11:06 AM | Report abuse

"'People should follow the law' is not a huge argumentative lift."

You wouldn't think, but then again have you been watching the torture debate lately?

Posted by: BigTunaTim | May 22, 2009 1:33 PM | Report abuse

Definition:
Irony
http://www.washingtonpost.com/wp-srv/business/documents/geithnertaxdocuments011308.pdf

Posted by: nmw1 | May 22, 2009 2:05 PM | Report abuse

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