Very few Americans enjoy paying taxes, but tax revenues allow the government to provide the infrastructure and services that Americans and U.S. businesses rely on and expect. There has always been some level of those who willfully and openly flout U.S. tax laws, but historically tax protestors were a relative few on the fringes of political and social life. Furthermore, the general bipartisan political consensus and desire to govern that used to exist isolated those who would advocate criminal tax evasion and other wrongful tax acts.
However, at least since the Lois Lerner scandal, some politicians have discovered that denigrating and attacking the IRS is an effective way to rally support. Unfortunately, these attacks are not without consequence. Perhaps spurred by the attacks, the IRS has had its funding slashed and its ability to identify and pursue those who conceal income, engage in stolen return identify fraud (SIRF), and other bad acts that cost taxpayers billions of dollars annually. In fact, from 2011 to 2013 the IRS amount erroneously paid out by the IRS increased from $3.6 billion to $5.8 billion. In other words, for honest taxpayers, the IRS’ troubles are not reason for celebration and may result in difficulties being passed on to honest Americans in more ways than one.
As reported in the Chicago Tribune, the IRS is losing hundreds of its elite, highly trained agents from its IRS Criminal Investigations unit (IRS CI). According to statistics provided by the paper the agency is on pace to have about 21 percent less CI agents than it did in 2011. In fact, since the peak number of investigators was reached at 3,363 in 1995, the total has continued to decrease and is now more than 1,000 agents fewer. This year there are only 2,316 CI agents and only 45 agents have been hired since 2013. This means that as the old guard retires – the agents who have handled high profile and complex tax fraud cases for decades – the new wave of agents to pass this knowledge to is conspicuously absent. It is highly likely that the IRS will lose immense amounts of institutional knowledge and the agency’s approach to matter will have to shift. According to Rich Weber who has run IRS CI since 2012, “We’re just not going to be able to focus on every type of crime as we shrink. We’re a nationwide agency, and there’s only so much you can do with 2,000 agents.”
What does this mean for ordinary Americans? To begin with, it could mean that some individuals will be tempted to roll the dice and cheat on their taxes. They may think that, in light of the news about the difficulties at the IRS, no-one is watching anyway. They may think that failing to disclose income, filing inaccurate returns, failing to disclose offshore accounts, and other missed obligations will escape notice. This is understandable given the fact that the IRS is absent the resources to hire new agents and after the loss of decades of institutional knowledge, the IRS may become ill-equipped to not only deter but also identify and pursue sophisticated tax schemes at the level they are currently able to sustain. This means that the agency will be forced to secure a return for its audit and enforcement budget elsewhere. While many agents will undoubtedly remain occupied combating identity theft – the Chicago Tribune reports that half of agents’ time in South Florida is consumed by SIRF matters — other agents may have to initiate audits and enforcement actions that are more straight-forward and less resource intensive. That is, pursuing the first-time tax evader who was motivated to commit tax fraud by reports of a dwindling number of agents at the IRS.
While the IRS is far from infallible, at its best, it does perform a necessary service for the government. Unfortunately the current approach to the agency is likely to harm American taxpayers as a reduced ability to enforce tax laws likely means that fewer individuals will be called upon to shoulder more of the burden. Alternatively, Americans and American businesses could see reductions in services provided by the government. Furthermore, just as Americans are being exposed to rhetoric which delegitimizes the agency and may encourage people to fail to satisfy their obligations, the shift of the agency may, necessarily, turn to exactly this type of tax fraud. The only “winners” in the difficulties being experienced at the IRS are the sophisticated tax criminals and evaders who are more likely to escape detection and pass their part of the tax burden onto the honest Americans.