Is Taxation Heading to an Honor System?

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George W. Bush built his budgets around tax cuts, not tax collection, and Republicans have never been overly fond of the IRS. So maybe it's not too surprising that the tax collection agency thinks it got quite a bit less of the budget pie than it needs — or that there has been much squawking from tax types.

Except that the most notable noises have not been from the agency itself but from the nine-member IRS Oversight Board, which was imposed on the agency in 1998 as part of one of the Gingrich brigade's ritual public flayings. The board issued a 24-page report Friday urging that the agency's budget for fiscal 2002 be $10.2 billion, or nearly 9 percent higher than Bush's allotment of $9.4 billion.

"It is well known that the IRS is broken," said the board's chairman, Larry Levitan, a former partner at Andersen Consulting. "Service to taxpayers is inadequate and enforcement levels have dropped to a dangerous level, giving the impression that it's easy to get away with cheating."

That impression may be accurate. The New York Times reported Friday that 668,018 delinquent taxpayers (up from 98 in 1998) have had their cases sent to an inactive file since the new-look IRS decided in June 1999 not to try to collect their debts. Cost, for 1999 alone: $2.5 billion.

Then there's the IRS's computer system, which is antiquated, creaky and in not inconsiderable danger of just collapsing one of these years and leaving the tax-collection apparatus in a shambles. If that happened, the end of the surpluses would just be the beginning (maybe you've about the state of tax collection in Russia). The board wanted $1.2 billion for the computers alone; Bush suggests $400 million.

The Bush budget also would result in 1,300 fewer employees hired than the board had asked for to end a decade-long staff reduction that has brought audits and other enforcement activities to worrisome lows. The staff shortage has prevented the IRS from providing proper taxpayer service, the board insisted, at a time when there is increasing demand for taxpayer education, heavier traffic at walk-in sites and more phone calls.

In a polite brush-off that will probably come to sound very familiar over the next month or two, Treasury Secretary Paul O'Neill said Bush's budget "requested adequate resources to fund necessary IRS improvements," adding that Bush's $9.4 billion was a 7 percent increase over the year before. (Which is a lot more than, say, the EPA is getting.)

"I am confident that the amount in the President's budget will allow the IRS to provide America's taxpayers with better quality service and help to enforce the tax law with integrity and fairness," O'Neill said.

The final arbiter, of course, is Congress, which will settle this disagreement and about a million others when members get back in late April from their two-week Easter break. But don't expect too many tax dollars to be heading the IRS's way — did we mention how much Republicans like the Revenue Service?