Last month, the GOP successfully passed a big, complicated revision of the United States tax code. Much of the changes are scheduled to take effect this year. Now, accountants, lawyers, and business owners are left scrambling to understand how to implement the law.
A new report from the Center on Budget and Policy Priorities, a left-leaning think tank, highlights another barrier to the law's implementation: the sorry state of the Internal Revenue Service. Thanks to years of funding and staffing cuts, the IRS lacks the manpower to both respond to what will likely be a deluge of questions from taxpayers about policy changes and to ensure that folks aren't taking advantage of loopholes in the new system. As the chart below illustrates, funding for the IRS has consistently declined in recent years:
Between 2010 and 2017, appropriated funding for the agency has declined by 18 percent. In response, the IRS has cut staffing by about 19 percent during the same timeframe. (Republicans in both the House of Representatives and Senate have proposed further cuts in 2018, although some have changed their tune since the tax legislation passed.) In 2015, seven former IRS commissioners wrote in a joint letter to Congress: "Over the last fifty years, none of us has ever witnessed anything like what has happened to the IRS appropriations over the last five years and the impact these appropriations reductions are having on our tax system."
Even before tax reform legislation, the IRS was struggling to execute all of its functions. In recent years, a number of anti-poverty advocates have raised concerns that the agency, which is now tasked with administering major social safety net programs like the Earned Income Tax Credit and the Child Tax Credit, is simply not equipped for these jobs. In a panel held in 2016 at the American Enterprise Institute, a conservative think tank, panelists from both sides of the aisle advocated for increased IRS funding to address these concerns.
In 2017, 21 percent of calls to the agency's customer service line simply weren't answered. Believe it or not, this actually represents an improvement over 2015, when almost two-thirds of calls were unanswered. The tax reform legislation will simply further increase the burdens on the already overtaxed agency, as the authors of the report make clear:
The 1986 tax reform sparked a 14 percent increase in call volume. More recent tax policy changes also have generated a significant increase in questions from taxpayers. Following the enactment of the Affordable Care Act in 2010, calls and correspondence rose 8 percent the next year and 18 percent the year after that. Call volume more than doubled after the stimulus tax cuts of 2008, even though the changes were relatively straightforward.
The IRS makes for an easy political target—nobody loves the agency that audits and demands reams of paperwork. And if the agency doesn't get the resources it needs to properly implement the new legislation, it's popularity may decline even further.