The head of the National Treasury Employees Union, which represents Internal Revenue Service employees, is asking Congress not to cut the IRS budget again.

The Senate Appropriations Subcommittee on Financial Services and General Government held a hearing Wednesday on the fiscal year 2018 Treasury Department budget. The administration’s budget calls for reducing IRS funding by another $260 million below the level enacted in fiscal 2017 and reducing overall IRS staffing by more than 4,200.

“NTEU knows any further reductions in funding and staffing will further exacerbate the adverse impact previous cuts have had on IRS’ ability to provide taxpayers with the service they need and enforcement of our nation’s tax laws,” NTEU national president Tony Reardon said in prepared testimony submitted for the hearing.

Reardon pointed out the IRS has lost nearly 18,000 employees and $1 billion in operating funds since 2010, leaving fewer IRS employees available for tasks such as answering taxpayers calling with questions, meeting them face to face, helping the poor and elderly file their tax returns, and fighting tax fraud and identity theft.

IRS Commissioner John Koskinen
IRS Commissioner John Koskinen

In 2016 and 2017, Congress gave the IRS an extra $290 million for taxpayer service, cybersecurity and identity theft protection. That helped the IRS raise the level of service provided by its employees from 38 percent in 2015 to 72 percent in 2016 and 79 percent respectively in 2017, the union pointed out. However, the Trump administration’s budget calls for reducing seasonal staffing costs by $239 million for the upcoming tax filing year.

IRS Commissioner John Koskinen also tried to persuade lawmakers to avoid budget cuts during the hearing. “The IRS remains very appreciative of Treasury Secretary Mnuchin’s support for the IRS to have appropriate resources, and in particular for upgrading our information technology systems,” he said. “We also strongly support the Administration’s efforts to reduce the federal budget deficit. We recognize that the IRS must always appropriately analyze and control our expenditures, and continue to be as efficient as possible with the funding granted by Congress. At the same time, I would note that the IRS remains one of the most cost-effective investments in the federal government; resources invested in the IRS increase revenue collections. This unique and critical role is vital to the function of the government and to keeping the nation and economy strong.”

He noted that in fiscal year 2016, the IRS collected more than $3.3 trillion in tax revenue, processed more than 244 million tax returns and other forms, and issued more than $426 billion in tax refunds. The IRS’s enforcement programs also collected more than $54.3 billion that same year, a return on investment of about $5 for every dollar invested in the agency. “While we will continue to look for efficiencies in our operation, it is important to recognize that the IRS remains one of the most efficient tax administrators in the world,” said Koskinen. “For every $100 collected in taxes, the IRS spends about 35 cents, which is far less than most other developed countries, according to statistics compiled by the Organization for Economic Cooperation and Development.”

Treasury Secretary Steven Mnuchin defended the administration’s budget request. “One of the President’s promises to the American taxpayer was that he would make sure that their money is spent wisely,” Mnuchin said in his opening statement. “A budget should not be an end in itself, but a means of improving the lives of Americans. More money does not necessarily translate into better policy. The President has challenged every agency and department to identify greater efficiencies and savings that can be realized both immediately and in the coming years.”

Treasury Inspector General for Tax Administration J. Russell George compared next year’s budget request with the current budget.

“The Department of the Treasury is in the process of developing a new strategic plan for [fiscal years] 2018–2022,” he said. “The IRS will publish its FY 2018–FY 2022 strategic plan by June 2018, which will serve as a roadmap to guide future IRS operations. To achieve these goals, the proposed FY 2018 IRS budget requests appropriated resources of approximately $11 billion. The total appropriation amount is a decrease of $260 million, or 2.3 percent below the FY 2017 enacted budget level of approximately $11.2 billion.”

“There are many challenges facing the IRS, the top challenge of which is protecting security over taxpayer data," George noted. "The IRS processes and stores a vast amount of data that is a prime target for domestic and international criminals."

Subcommittee chair Shelley Moore Capito, R-W.Va., described the pressures facing the IRS. “The IRS has the significant role of administering our nation’s tax laws,” she said in her opening statement. “According to the IRS, its mission is to provide America’s taxpayers with top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. To carry out this mission effectively, the IRS must execute its responsibilities in a manner that fosters taxpayers’ faith in the impartiality of the agency. Taxpayers should expect that the work of the IRS will be carried out without regard to an individual’s exercise of their constitutional rights. And the IRS needs to demonstrate though action, not just words, that taxpayer service really is the agency’s top priority. In addition, the IRS needs to work hard to restore confidence in its ability to protect not just taxpayers’ rights, but also their personal information and privacy. As the IRS continues to evolve and make changes in its service delivery systems, there must be improvements in its ability to manage that change without adversely impacting taxpayers or compromising their personal information.”

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.