Home Media Center News Releases

Washington, D.C.—The Internal Revenue Service (IRS) Oversight Board had added its voice to the chorus of those calling on Congress to avoid the dire consequences—including the loss of much-needed government revenue—that would flow from drastically slashing the IRS budget.

In letters to the chairs and ranking members of both the House and Senate Appropriations Committees, the Oversight Board called the gap between its own fiscal 2012 proposed budget for the IRS and those pending in both chambers “disturbingly large.”

The Board, which was created by the 1998 IRS Reform and Restructuring Act and has significant IRS oversight responsibilities in such key areas as budgets and strategic planning, said it recognizes the “intense pressure” Congress is under to reduce all federal spending.

Nonetheless, the letter signed by Board chairman Paul Cherecwich Jr. said the body believes that IRS funding decisions should fully consider short- and long-term consequences.

President Colleen M. Kelley of the National Treasury Employees Union (NTEU), who has been leading efforts to secure adequate IRS funding, welcomed the Board’s letter. “The Oversight Board clearly understands the impact of severe funding restrictions,” she said. “I urge Congress to do the wise thing for the country and properly fund the IRS.”

At a mid-October press briefing, President Kelley warned that proposed fiscal 2012 cuts in IRS funding of as much as $600 million could mean workforce reduction of 3,000 to 4,000 employees and would result in the loss of some $4 billion in revenue annually.

The Oversight Board echoed that view, noting that over the next 10 years, the loss would be some $40 billion, even assuming no increase in non-compliance by taxpayers as a result of reduced enforcement efforts necessitated by IRS staffing cuts.

Similarly, earlier this week, IRS Commissioner Douglas Shulman issued a clear warning about drastic cuts in the IRS budget that would lead to noticeable degradation of both service and enforcement. And just yesterday, in a letter to Appropriations Committee leaders in both chambers, the administration reiterated its view that the government must have the resources to do its job, and that means adequately funding the IRS.

Director Jacob Lew of the Office of Management and Budget said in the letter that proposed significant cuts in the IRS budget would “undermine taxpayer service, reduce collections from scofflaws, and add billions of dollars to the deficit.” Lew added that investments in tax enforcement and compliance efforts “will save money in the long term and help ensure that all taxpayers live up to their responsibilities.”

For its part, the Oversight Board referred to the private sector experience of some of its members. “Based on our private sector experience, Board members offer the following analogy,” they wrote. “It does not make good business sense for a company experiencing difficult economic times to cut back its accounts receivable department. Such a decision would be characterized as penny wise and pound foolish.”

Moreover, it said, “reducing the IRS’s capacity to deter tax cheating puts compliant business taxpayers at a competitive disadvantage to businesses that cheat, which is not behavior that should be encouraged, however unintended.”

It noted the vast majority of taxpayers are complaints with their obligations, and said “these law-abiding taxpayers collectively benefit when the IRS enforces the law to ensure that non-compliant taxpayers also pay what they owe.”

The Board added: “Not only does reduced revenue negatively impact the operations of the federal government, but reduced enforcement causes those who are voluntarily compliant to lose confidence in the tax system.”

As it does every year, the Oversight Board has issued a recommended budget for the IRS. For fiscal 2012, it recommended $13.342 billion. The budgets passes by the House and Senate Appropriations Committees propose fiscal 2012 IRS funding of $11.516 billion and $11.663 billion, respectively.

NTEU is the nation’s largest independent union of federal employees, representing 150,000 employees in 31 agencies and departments.