How the IRS Should Spend Its $80 Billion Windfall
Why doesn’t IRS get organized first?
Mr. DeMuth is author of “The Overtaxed Investor: Slash Your Tax Bill and Be a Tax Alpha Dog.”
Focus on the ‘Service’ part of its name and copy companies that have earned customers’ respect with pleasant and efficient treatment.
Something is wrong at the Internal Revenue Service, as seen by the furor over its $80 billion appropriation in the Inflation Reduction Act. About 57% of the money will be spent on “enforcement” while less than 4% goes to “taxpayer service,” the Congressional Research Service estimates.
The bill has its priorities upside down. The agency is called the Internal Revenue Service, and service has been neglected.
You’ve seen the headlines. The IRS recently shredded 30 million paper returns because it couldn’t scan them. The agency is sitting on a backlog of 17 million unprocessed returns. Callers with questions wait on hold for hours. And with 4.75 million pieces of unanswered taxpayer corre-spondence piled on their desks, the IRS may not write back anytime soon.
Instead of conducting itself like a Kremlin bureaucracy, the IRS should brush up on cus-tomer service. What a differ-ence that would make. Accord-ing to IRS Commissioner Charles Rettig, even a 1% improvement in voluntary compliance would yield an additional $30 billion a year in new revenue. Mr. Rettig’s term expires in November. His successor should come from an American business known for cheerful and efficient customer service, such as Costco or Southwest Airlines. The last thing the IRS needs is a thousand more secret agent CPAs carrying firearms. Instead, it needs a better call center, where the phones are answered with a smile and a sincere wish to help. The new commissioner should change the relationship between the IRS and the citizens it serves, assuming goodwill and fair dealing on both sides.
Lawmakers say not to worry about the $45.6 billion earmarked for enforcement, which will be spent going after bad guys, not us. After all, if we’re honest, we have nothing to fear from the IRS. These sentiments sound disingenu-ous. The tax code and regula-tions are full of complexities on which reasonable opinions diverge. There will be a lot of broken crockery when the enforcement gang comes to town. You are guilty until proven innocent, and the IRS has weapons like civil forfei-ture in its arsenal. It can be hard to hire an attorney when your bank accounts have been frozen.
When President Truman created the Internal Revenue Service in 1952, it was “to prevent improper conduct in the public service, to protect the Government from the insidious influence peddlers and favor seekers, and to expose and punish any wrong-doers.” By wrongdoers, Truman didn’t mean tax cheats. He was pointing to those within the predecessor agency, the Bureau of Internal Revenue, who had betrayed the public trust. Truman reorga-nized the bureau as the Internal Revenue Service because that trust had been lost. One thinks of the Lois Lerner saga or the deliberate leaks of the IRS’s political enemies’ tax returns to the press—none of which were prosecuted. Would President Truman see today’s IRS as an agency deserving the respect of the American people?
The IRS can repair its reputation by serving Ameri-can taxpayers, employing mostly carrots and the stick only as a last resort (and carried by the police). Even without the panacea of a simplified tax code, this would lead to better voluntary compliance and more tax revenue.
Mr. DeMuth is author of “The Overtaxed Investor: Slash Your Tax Bill and Be a Tax Alpha Dog.”
How the IRS Should Spend Its $80 Billion Windfall by @PhilDeMuth https://www.wsj.com/articles/how-the-irs-should-spend-its-80-billion-windfall-customer-service-mail-call-backlog-tax-code-enforcement-rettig-11661269631