06/01/2023 in Accountant

Why Taxpayers Should Be Skeptical of Calls to Defund the IRS

Why Taxpayers Should Be Skeptical of Calls to Defund the IRS

In recent weeks, discussions around debt ceiling legislation have taken the spotlight as the possibility of a federal default looms. Among the proposed budget cuts, one area that has gained popularity is reducing funding for the Internal Revenue Service (IRS). Although the IRS may not enjoy widespread popularity, there are several reasons why politicizing and defunding the agency should concern taxpayers.

Here are some potential drawbacks:

  1. Decreased tax revenue: The primary role of the IRS is to collect taxes owed to the government. By defunding or reducing its resources, the IRS’s ability to effectively enforce tax laws could be hindered. This may lead to a decline in tax compliance, ultimately resulting in reduced tax revenue for the government. Given that tax revenue plays a critical role in funding various government programs and services, a decrease in revenue can impact public services and infrastructure.
  2. Increased tax evasion: Politicizing and defunding the IRS, coupled with limited resources and enforcement capabilities, could potentially contribute to a rise in tax evasion. Taxpayers may perceive a weakened IRS as an opportunity to underreport income, engage in tax fraud, or completely evade their tax obligations. This could undermine public trust in the tax system and place an unfair burden on honest taxpayers.
  3. Weakened enforcement efforts: Audits and investigations are essential for ensuring tax law compliance. Defunding the IRS or subjecting it to political pressures can weaken its ability to effectively carry out these enforcement efforts. Insufficient resources may result in a decrease in audits, delays in investigations, and a reduced capacity to address complex tax evasion schemes. Such circumstances could undermine the integrity of the tax system and enable some individuals or entities to evade their tax obligations.
  4. Reduced taxpayer assistance: The IRS offers various services and resources to help taxpayers understand their tax obligations, accurately file returns, and resolve issues or disputes. Defunding the agency could lead to a reduction in taxpayer assistance programs, including helplines, walk-in assistance centers, and online resources. With fewer options for guidance, taxpayers may experience increased confusion and potentially make more errors in their tax filings.
  5. Impaired economic stability: Adequate tax collection is vital for maintaining economic stability. Defunding the IRS could hinder the government’s ability to track and address tax-related issues that could impact the economy. Insufficient resources may result in delays in processing tax refunds, slower resolution of tax disputes, and an overall decrease in efficiency. This can have negative consequences for individuals, businesses, and the broader economy.
  6. Threat to nonpartisan operations: Politicizing the IRS can erode its reputation as an independent and nonpartisan agency. The IRS is responsible for administering tax laws impartially, irrespective of political affiliation or bias. When the agency becomes subject to political influence, public trust and confidence in its operations may be undermined. Taxpayers might view tax decisions as politically motivated, leading to increased skepticism and a loss of faith in the fairness of the tax system.

It is crucial to recognize that tax policy and administration are complex matters. Any significant changes to the IRS should be carefully considered to avoid unintended negative consequences.