JONATHAN CHAIT APRIL 19, 2010
Good column by Ezra Klein on the Republican war on the Internal Revenue Service:
In the late '90s, the Republican-controlled Senate Finance Committee held a series of dramatic hearings in which individuals sat behind screens and haltingly, tearfully, told stories of IRS persecution. Some of the stories featured genuine misdeeds. Others fell apart upon later examination (Robert McIntyre, the director of Citizens for Tax Justice, remembers one in particular where it turned out the witness was living off his employee's payroll taxes).
But the trials worked to demonize the IRS. The result was the IRS Restructuring and Reform Act of 1998, which made enforcement more difficult and began a long cut in the IRS's collection resources.
A report released by Citizens for Tax Justice shows that between 1995 and 2005, the IRS's budget was slashed by a fifth. Between 1995 and 2003, its enforcement division lost 36 percent of its staff. They were barred from conducting research on tax evasion, which meant they lost the ability to keep up with new tricks that accountants had discovered to game the tax code. More bizarrely, audits of the poor increased, through a special program meant to ferret out Earned Income Tax Credit fraud, but audits of people making more than $100,000 fell from 210,000 in 1996 to 92,000 in 2001—despite the fact that there were 80 percent more income filings over $100,000.
I suppose this behavior flows naturally from an ideological premise that deems anything that decreases tax revenue a positive good. But of course, decreasing tax revenue by creating a deterioration in tax compliance is insane. Why not make the IRS more effective and use the offsetting revenue to cut tax rates? At some point political ideology becomes incompatible with the the effective working of a modern administrative state.