Taxpayers need help. So does the IRS.

Why We Wrote This

Taxes aren’t loved. But public trust in the basic fairness of tax administration is actually a bedrock of healthy democracy. On this tax day, the travails of the IRS are getting some bipartisan attention.

Aaron P. Bernstein/Reuters
Internal Revenue Service Commissioner Charles Rettig testifies on his agency's budget before a House Appropriations Subcommittee hearing on Capitol Hill in Washington April 9.

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“When I started at the IRS, we had approximately 35 revenue officers in the Milwaukee area. ... Today we have approximately six,” says Doreen Greenwald, a Wisconsin IRS employee and a workers’ union representative. It’s a sign of how tight budgets have squeezed the Internal Revenue Service over the years, especially since 2010.

It’s not just morale at the tax agency that’s at stake. The result is frustrations for taxpayers trying to resolve issues. Finance experts say it can affect something near the heart of any democratic government: public trust in, and compliance with, the tax system. In the United States, that trust doesn’t appear to be near a breaking point, but experts say it shouldn’t be taken for granted.

At congressional hearings last week, some Republican lawmakers from the party that led IRS budget cuts expressed concerns about improving the agency. “There’s a clear need here for additional enforcement and for additional service,” says Alan Viard, a tax-policy expert at the conservative American Enterprise Institute in Washington. “That’s kind of a delicate balance.”

Early this month, when Virginia resident Casey Lewis was in a bind over how to pay her tax bill, she tried dialing the Internal Revenue Service. She was hoping to set up a payment plan with the IRS for a significant amount – $1,600 – that she hadn’t expected to owe.

Online efforts with the agency had already failed her. “Your website keeps locking me out because it claims some of my info is wrong (but doesn’t tell me what!),” Ms. Lewis posted on Twitter.

Trying by phone didn’t work any better: After 80 minutes on hold, she felt she had to hang up.

Ms. Lewis is far from alone in having a tough experience while trying to be a responsible taxpayer.

About 4 in 10 phone calls to the IRS go unanswered, staffing and budgets have declined, and the agency patches its databases together with software that dates back as far as the presidency of John F. Kennedy, IRS Commissioner Charles Rettig told members of Congress in hearings last week.

The issue is not just an annoyance. It can mean lost time and money for American taxpayers. And finance experts say it can affect something near the heart of any democratic government: public trust in, and compliance with, the system of collecting revenue for public programs.

In the United States, that trust doesn’t appear to be near a breaking point, but experts say it shouldn’t be taken for granted. Both a tax “compliance gap” and weak public ratings for the IRS signal that, at a minimum, there’s plenty of room for improvement.

“You’ve got to have enough trust so that most people will pay what they owe, most of the time,” says Alan Viard, a tax-policy expert at the conservative American Enterprise Institute in Washington.

‘A delicate balance’

Even if citizens may disagree with elements of fiscal policy, that bedrock of trust hinges on people feeling the tax system created by Congress is “fair enough to be legitimate,” Mr. Viard says. It also hinges on the tax-collection agency being perceived as effective: reining in cheating while also being helpful rather than harassing honest taxpayers.

“That’s kind of a delicate balance,” Mr. Viard says. “There’s a clear need here for additional enforcement and for additional service.”

Many other tax-policy experts agree on that general point. Officials and workers at the agency say the same.

“When I started at the IRS, we had approximately 35 revenue officers in the Milwaukee area. ... Today we have approximately six,” says Doreen Greenwald, a 34-year IRS worker who is also a local union president for the National Treasury Employees Union. “And from my perspective, our work has increased based on a lot of the complexities of the tax law, as well as the work itself is more complex.”

This is a year of particularly high stress for the agency and American taxpayers alike.

It’s the first tax-filing season under Republican-passed tax changes signed by President Donald Trump in 2017. While broadly cutting individual and business taxes, the law has also transformed the tax code in ways that many Americans are only now grappling with. And the IRS is still in the process of clarifying the tax law for taxpayers and accountants by preparing detailed guidance on the changes.

Despite that, the positive news is that for millions of Americans the tax-filing process in recent weeks has gone smoothly. The gap between what taxpayers owe and what the IRS receives is large – about $458 billion a year, roughly 12% of owed revenue – yet the U.S. remains a leader on tax compliance compared with many other nations.

“We have the greatest tax system in the entire world,” Ms. Greenwald says. “And it’s based mostly on a voluntary compliance system.”

Signs of strain

Surveys have found that the vast majority of Americans view taxpaying as a civic duty. And by some polls, the IRS has been edging up rather than down in public esteem. Still, signs of strain are clear: 

  • The IRS ranks near the bottom among federal agencies for its customer service.
  • President Trump’s $11.5 billion budget request for the IRS would be a 1.5% increase (with a $362 million boost separately planned for enforcement), but the agency’s budget is down 18% since 2010 after adjusting for inflation.  
  • A seven-year hiring freeze starting in 2011 strained morale and has left a high share of workers near retirement.
  • A six-year plan to overhaul IRS computer systems is underway, but the agency is beset by relentless cyberattacks on the Treasury’s troves of money and taxpayer information.
  • Audits of questionable tax returns have plunged even more deeply than the overall cuts in staff.

Some critics say the agency’s woes stem partly from a deliberate attack on its funding by Republican lawmakers, channeling the anti-government spirit of the tea party movement in 2010 and beyond.

But some of the latest Republican rhetoric has been about improving the agency, not abolishing it (as Sen. Ted Cruz, R-Texas, had called for as a presidential candidate in 2016).

Sen. Mike Enzi, R-Wyo., spoke in last week’s congressional hearing about how the closure of a taxpayer-assistance office was affecting his constituents. Commissioner Rettig cited “unexpected recent retirements” for the center’s closure. 

Sen. James Lankford, R-Okla., asked about whether the agency needed help in finding cybersecurity professionals (yes, he was told) and about the implications of the tax gap for public trust. Millions of taxpayers “want to get it right, and it really bugs them when someone is ripping the system off,” Senator Lankford said.

Commissioner Rettig agreed, calling for an enforcement presence in “as many neighborhoods as possible.” (And in a separate hearing with House members, he acknowledged the need “to get the audit rates up for the more wealthy taxpayers ... by taking a strong look at the issues that I am aware of that wealthy individuals might engage in,” such as pass-through entities, which allow many firms to lower their tax rates by reporting income on individual returns.)

Assistance deferred

Better customer service is the other side of the coin.

“Its not unusual for me to be on hold for an hour and half or more,” or to not even be offered the option of waiting on hold, says Deborah Bechtel, who says she often calls the IRS in her work as an enrolled agent helping taxpayers near Albany, New York.

When she does get through, she says the workers are doing their best to be helpful, but getting an issue resolved is far from assured.

For Ms. Lewis, the taxpayer from Norfolk, Virginia, the outcome of her efforts wasn’t a happy one. After failing to get through by phone, she ended up selling her late mother’s jewelry to enable payment of her whole remaining tax bill for 2018, she says in a text interview online.

She, for one, would like to see the IRS get more funding.

“I think the IRS could definitely use a bigger slice of the budget,” says Ms. Lewis, who works as an administrative assistant for a health insurance company.  “I honestly feel that [the] system is tilted to favor the very rich while setting up roadblocks for the poor and working class.”

She points to the way lobbying by the tax-software industry has – so far at least – put up roadblocks to the idea of a federal “free-file” system that would let all taxpayers largely rely on the IRS to prepare their taxes using information in its databanks (with the opportunity for individuals to amend IRS-prepared forms).

“No one will ever enjoy paying taxes,” Ms. Lewis says. “But making it less onerous for consumers could help.”

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