What would happen if Congress stripped $14 billion from the IRS's budget?
LEILA FADEL, HOST:
What would happen if Congress stripped $14 billion from the IRS budget? That's what House Republicans want to do in order to pay for additional aid to Israel. Democrats oppose that plan, and Senate leaders have said that bill won't get a vote. But we wanted to understand who the winners and losers would be if the IRS underwent the dramatic budget cuts Republicans want, so we called on Vanessa Williamson. She studies taxation at the Brookings Institution. And she says the nation's revenue agency has been underfunded for 40 years.
VANESSA WILLIAMSON: And what that means is the IRS can't do its job, right? They can't hire new agents, they can't hire agents that have the sort of technical capacities to be able to look at the tax returns from very wealthy people, for example, who have very expensive people working on their side. They don't have the resources they need to do their jobs. We've underfunded the agency in a way that makes things harder for average Americans and makes it a lot easier for people who are trying to avoid paying their taxes.
FADEL: Does it make financial sense for the U.S. government to cut funding to the IRS?
WILLIAMSON: (Laughter) The IRS is the Internal Revenue Service - right? - so that means they raise the revenue. If you cut the Internal Revenue Service, we get less revenue, right? This is apparently confusing, but it's a matter of addition and subtraction. So if you cut the IRS budget by a dollar, you tend to lose $2.
FADEL: I liked how you even laughed at the question. I mean, but I guess the question then is why? Then why has it been such a Republican priority, frankly, for a while now? And obviously it's in the news now. There's this House bill that wants to cut billions of dollars from the IRS to pay for aid to Israel. Why the IRS?
WILLIAMSON: Well, I think that it's a symbol on the right. I think that for Republicans, the capacity of the government to tax has become, you know, since the Reagan era, this symbol that the government has a right to take some money from all Americans and use it for public purposes. And, I think, at the end of the day, that's not a basic function of government the Republican Party is convinced is important.
FADEL: Let's talk about what falls through the cracks when the IRS is underfunded that would be really important.
WILLIAMSON: So there are two sides of this, right? There's the part that is making tax paying easy - right? - so the IRS answering the phone, all the things that are sort of the customer service side. The other piece is enforcement, and that's really important. In fact, it's the thing Americans think is most important. If you ask Americans what they are most upset about when it comes to our tax system, it's not how much they pay and it's not even how complicated the tax system is, it's the idea that rich people and corporations aren't paying their share. So if we don't have an adequate enforcement system, we're failing to address the No. 1 concern Americans have about the tax system.
FADEL: So if you don't have an adequate enforcement system, how does the IRS pick and choose who they go after?
WILLIAMSON: So what we've seen is that as the IRS funding has declined over many years - and this is partly a congressional priority - the Congress asked the IRS to focus more on lower-income tax filers. But what we've seen is that people in the top 0.1% of earners are as likely to be audited as people earning the earned income tax credit, which is a work credit for low-income families.
What that meant, of course, is that poor people are getting audited at this very high rate because they don't have the resources to explain why they needed this credit. They get, you know, mail from the IRS, it's intimidating, they often don't respond. What it meant was that poor people were getting audited at really high rates, and also that Black Americans were getting audited at really high rates. So there is a very discriminatory aspect of the audit system. And one of the things that this funding would have done is push the audits back to where they belong, to the top where the tax gap actually is, where the money isn't coming in among the really rich earners.
FADEL: Vanessa Williamson is a senior fellow at the Urban-Brookings Tax Policy Center. Thank you, Vanessa, for your time and your insights.
WILLIAMSON: Thank you.
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