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USAToday
April 6, 2004
Writing Uncle Sam a check for taxes owed is a springtime ritual everyone
happily would avoid. Even so, from now through April 15, millions of
Americans will be filling out tax forms and paying their fair share
to keep the federal government running.
Even more painful for the honest filers who fork over the money is the
fact that their ranks are dwindling. According to the IRS, the number
of companies and individuals who cheat on their taxes is growing because
the agency lacks the staff to enforce compliance with the tax code.
The IRS estimates it loses $250 billion a year from those who fudge
on their returns, fail to file or engage in tax-avoidance ruses. The
lost revenue equals 10% of the federal budget and nearly covers Medicare's
cost.
Cracking down on cheats is a less-controversial way to reduce a record
$500 billion deficit than cutting programs or raising tax rates. Yet
Congress has spurned requests by the Clinton and Bush administrations
to give the IRS more money to go after scofflaws.
Lawmakers have been loath to enhance tax-collection enforcement even
though the investment more than pays for itself. According to a study
released last week by a board Congress created to oversee the IRS, a
$1 billion - or 10% - increase in the agency's budget would yield at
least $5 billion a year in collections. President Bush (news - web sites)
has gone halfway by proposing a $490 million increase for the fiscal
year that begins Oct. 1.
Even if approved by lawmakers, the additional funds would not make up
for a decade of congressional cutbacks that have hampered the IRS' ability
to do its job. Consider:
•Fewer agents. Since 1996, the number of IRS agents has been slashed
from 22,983 to 16,749, a 27% drop. That has led to a decline in the
number of individuals audited, from 1.9 million to 849,000. Criminal
cases brought against alleged tax cheats have dropped by nearly half.
Civil cases have fallen by more than 60%.
•More shelters. In 2003, the IRS was able to pursue only 18% of
abusive tax scams it discovered. Had it challenged all of these cases,
it would have collected an additional $447 million. The IRS suspects
it is losing billions more put in an increasing array of sophisticated
shelters that it has been unable to detect as a result of too few investigators.
•More cheats. As IRS enforcement efforts have lagged, the public's
acceptance of cheating has risen. Since 1999, the percentage who say
it is OK to cheat "a little here and there" has grown from
8% to 12%, according to a poll by the IRS oversight board. The number
saying it is OK to cheat "as much as possible" has grown from
3% to 5%.
IRS critics in Congress say agency cutbacks were needed to curb its
past abuses. They say it has received more money in recent years as
it has reformed its ways.
Indeed, congressional hearings in the 1990s exposed an overzealous agency
that harassed thousands of honest taxpayers with overly aggressive audits.
Under congressional pressure, the IRS has become more customer-friendly.
Now it is properly focusing its firepower where most cheating occurs:
on the complex returns of corporations and rich individuals. But it
still lacks the funds to do that job right.
Tackling tax cheats is a sensible way to bring in more money to a deficit-ridden
Treasury - and reassure honest taxpayers that they're not the exception
on April 15.
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