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Steven Mnuchin Is Right—the IRS Is Under-Funded

And under-staffed, for that matter.

By Dwyer Gunn


Steven Mnuchin. (Photo: Spencer Platt/Getty Images)

Earlier this week, at his confirmation hearing, Steven Mnuchin, President Donald Trump’s pick for secretary of the treasury, took the rather unusual step of suggesting that the much-maligned Internal Revenue Service could use both more employees and more funding.

“I was particularly surprised that at looking at the IRS numbers, the IRS headcount has gone down quite dramatically, almost 30 percent over the last number of years,” Mnuchin said. “I don’t think there is any other government agency that has gone down 30 percent and especially for an agency that collects revenues, this is something I am concerned about. Perhaps the IRS just started with way too many people, but I am concerned about the staffing of the IRS. That is an important part of fixing the gap.”

As Vox’s Timothy Lee reports, providing adequate staffing and resources to the IRS is a smart idea. It would enable the agency to collect more revenue and perhaps deal more effectively with concerns about technology, cyber-security, and identity fraud. It would also address another problem I’ve written about in the past: Thanks to the welfare reforms of 1996 and changes in the social safety net, the IRS is increasingly being asked to fight a tax war on poverty, a role it was not designed for and is ill-equipped for at present.

The Earned Income Tax Credit has become the largest government cash transfer program for low-income families with kids — approximately 50 million people in this country now receive benefits through the EITC or Child Tax Credit. The administration of safety net benefits through the tax code, meanwhile, isn’t likely to decrease anytime soon — expanding the EITC is one of the few anti-poverty programs that both political parties support.

In general, IRS administration of tax credits is efficient and low-cost, but the agency doesn’t have the headcount or expertise to help when the inevitable snafus arise. Here’s what Susannah Camic Tahk, a professor at the University of Wisconsin Law School who is studying the tax war on poverty, told me last year:

Sometimes, as a result of this pretty easy application process, benefits end up in the hands of the wrong folks. And the IRS doesn’t have the expertise to help. Or recipients who are entitled to benefits don’t get them. We don’t have the giant administrative apparatus to help people who may have been incorrectly denied a benefit.

There are ways to address this problem. Congress has set aside money for taxpayer assistance clinics in recent years, and the American Enterprise Institute, a conservative think tank, proposed a number of other smart reforms at a panel last year. Hopefully, Mnuchin’s focus on the topic is an encouraging sign of change to come.