Hearing of the Financial Services and General Government Subcommittee of the House Appropriations Committee - IRS Challenges

Hearing

Congressman José E. Serrano (D-NY), Ranking Member of the House Appropriations Financial Services and General Government Subcommittee, today delivered the following opening remarks at a hearing to evaluate the challenges the Internal Revenue Service (IRS) is currently facing due to budgetary cuts.

Thank you Mr. Chairman. I would also like to welcome Department of Treasury Inspector General for Tax Administration, J. Russell George, and National Taxpayer Advocate Nina E. Olson back to the committee. I know you are all very busy, so I thank you for making the time to be here today.

The IRS ensures the collection of taxes and provides taxpayer services. Approximately $2.9 trillion dollars in federal revenue is collected by the agency each year. The agency employs a staff comprised of around 100,000. These individuals help millions of Americans to file their taxes, process over 237 million tax returns, and conduct tax audits and investigations. Without the work of the IRS staff, the federal government would not be unable to function since they collect the vast majority of the revenue that allows that to happen. As many of us are aware, the IRS has implemented the recommendations of the Treasury Inspector General for Tax Administration to remedy problems resulting from the inappropriate targeting of liberal and conservative 501(c)(4) entities. I applaud the agency's undertaking to implement reforms and prevent problems from repeating.

With that being said, there are many challenges that the IRS is currently facing. The IRS has been severely underfunded for several years due to budget cuts made by this committee--which I strongly opposed. These budget cuts have made it difficult for the agency to hire and maintain personnel who are essential to carrying out taxpayer services and enforcement, and who are the ones who are charged with fixing the problems at IRS. As a result of understaffing, the IRS is anticipating that in FY 2015 it will only be able to answer around 50% of the calls they receive from taxpayers seeking assistance, that percentage goes up or down depending on when they release seasonal workers. That is a 57% decrease from the level the agency was able to function at over a decade ago in 2004. The IRS also anticipates being unable to collect $2 billion in taxes owed to our nation's government as a result of these cuts. I hope we will get a chance today to discuss the impact of these cuts in your eyes.

The current operating budget is at its lowest since FY 2008 and the lowest funding level since 1998, when adjusted for inflation. Since then the number of filers has increased by 23 percent. New tax responsibilities set forth by the Affordable Care Act and the Foreign Account Tax Compliance Act passed by Congress are adding to the IRS' growing workload. The President's FY 2016 request recognizes the need to provide the agency with a workable budget by requesting more than $1.3 billion over FY 2015. I hope this subcommittee will take that request seriously. We as lawmakers and as members of this subcommittee are charged with the task of ensuring that the IRS is able do its job effectively, and as a result of these cuts, they increasingly cannot.

I am also concerned with the problems families who claim the Earned Income Tax Credit, or EITC, face. The EITC is a successful national anti-poverty program that helps low-income families attain much needed financial support. These families make up a large percentage of the IRS' audits due to unintentional errors, and not fraud. This is mostly attributed to the complexity of EITC's rules and to errors made by commercial preparers. The IRS should implement several changes in order to reduce the EITC error rate, and has made some good steps in this process. As I stated before, cutting the IRS' budget will hinder any progress that has been made. I hope that we can assure that the IRS maintains a reasonable budget, and is able to make sure that taxpayer programs like the EITC are able to fulfill their mission.

I look forward to discussing these and other issues with you today. Thank you, Mr. Chairman.

Source