The IRS Has Problems That $80B Won't Solve

Unlike the IRS, many state tax agencies at least use scanners, and those are hardly the wealthiest or most nimble institutions in American society.

‘Alternate Reality’

When I see that the IRS reduced staff by 22%, I imagine an alternate reality in which the IRS had replaced a good deal of its office staff with better information technology, as many American businesses started to do in the 1990s.

In this parallel universe, the staff of the IRS is down and the productivity of the IRS is up, as has happened to so much white-collar office work. But that is not the world we live in.

The advocates for additional funding should better understand why not everyone in America is thrilled with the agency’s new budget boost. It’s not just a bunch of kooks who fear “an army” of weapon-toting IRS agents, or rich people who feel they shouldn’t have to pay their fair share. It’s normal people who think it’s a bad idea to reward an agency that seems so dysfunctional.

For example, according to the GAO’s exhaustive report, a major milestone in upgrading the agency’s 60-year-old database has slipped nine years, from 2014 to 2030, despite the project being radically scaled back.

The agency has also “revised the program’s cost, schedule, and scope goals on numerous occasions, including seven times between 2016 and 2019.” That does not inspire much confidence.

To be clear, I am on board with the basic idea that we ought to enforce existing tax law better rather than creating new tax hikes. Former treasury secretary Larry Summers and others have put forward compelling arguments for that conclusion.

But are we so sure that another $80 billion is what will induce superior IRS performance?

I propose an alternative. Plenty of government agencies, or for that matter private institutions, have improved their performance without extra money, whether in America or abroad.

So tell the IRS to start moving into the modern age, and after they have shown they can make better progress, give them the money they need to finish the job.

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Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”