Congress turns to the IRS for cash

IRS
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Republicans and Democrats alike are looking to the IRS as they try to pass a highway bill by the end of the month.

Approving stricter tax compliance measure is one of the few areas of agreement between the House and the Senate when it comes to paying for an extension of transportation funding.

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The push to collect more taxes out of outstanding mortgages and estates also comes a time when Republicans are seeking to slash the IRS’s budget — a dynamic that isn’t lost on the agency’s top officials.

John Koskinen, the IRS commissioner, told reporters on Thursday that the agency would implement whatever laws Congress throws its way — just as it did with the Affordable Care Act.

But Koskinen suggested that implementing tax changes from the highway bill wouldn’t come without some pain, after his agency absorbed more than $1 billion worth of budget cuts over the last five years. 

“The problem with declining resources is, the only place that money can come from is tax enforcement, taxpayer services and information technology and security,” Koskinen said, noting that the IRS’s top priority is making sure the annual filing season runs smoothly. “So we’ll have to make tough choices.”

Republicans don’t see it that way, arguing that the IRS is wasteful with the funding it gets.

“I think they make poor use of the revenue they have, and if they would prioritize these issues they’d collect more revenue legitimately from taxpayers who legitimately owe it,” said Rep. Kevin BradyKevin BradyUS wins aerospace subsidies trade case over the EU Republican Study Committee elders back Harris for chairman Congress must pass Sunset the Tax Code bill before election MORE (Texas), a senior Republican on the House Ways and Means Committee.

Republicans and Democrats have been battling for years over how much funding the IRS needs — a fight that was magnified by the agency’s 2013 acknowledgement that it improperly scrutinized Tea Party groups.

The IRS’s high-water mark for funding came in 2010, the last full year of Democratic control in Washington, when it received $12.1 billion. The agency is getting $10.9 billion this year, and the Republican-led House and Senate both want to wring more savings out of the agency.

The Senate Appropriations Committee approved a bill on Thursday that would cut the IRS’s funding to $10.5 billion, while House Republicans want to go even further. Their appropriators slashed the IRS funding down to $10.1 billion, or a full $2 billion below the 2010 figure.

In the meantime, the Senate and House are considering policy changes for the IRS ahead of the July 31 transportation deadline.

Senate GOP leadership, wanting to take the issue off the table through next year’s election, are pushing for a six-year highway bill that includes three years' worth of offsets. The Senate next votes on its highway bill on Sunday.

With little exception, the Senate bill uses the same provisions that were in a five-month, $8 billion extension the House passed earlier this month. The House highway bill, which would fund programs through mid-December, gets about 60 percent of its funding from tax compliance measures.

The biggest of those proposals would require lenders to give the IRS more information about mortgages to battle inaccurate reporting, force heirs to give more immediate information about inherited assets, and allow the IRS more time to go after certain taxpayers who understate their liability.

Budget hawks have said those offsets aren’t gimmicks, but Eric Toder of the Urban-Brookings Tax Policy Center said that he wasn’t sure that those provisions would make life more difficult for the IRS.

“This isn’t necessarily creating more workload,” Toder said. He added that the IRS’s concerns about its dwindling budget and the impact its funding is having on operations is warranted, but “aren’t necessarily relevant to this.”

Koskinen and other IRS officials have for months complained that Congress has been heaping more work upon them — including ObamaCare — while slashing the agency’s funding.

Those funding cuts, Koskinen said, were directly responsible for a steep drop in IRS customer service. IRS operators were able to answer less than two out of every five phone calls the agency received during the most recent filing season. Watchdogs such as the Government Accountability Office have also found that the IRS has had to pare back key programs because of budget cuts.

But Republicans say the IRS could reverse the hardships that taxpayers are suffering just by streamlining its operations.

Rep. Peter Roskam (R-Ill.), the chairman of a House Ways and Means subcommittee that oversees the IRS, has said the agency slashed its own taxpayer assistance budget, gave millions in bonuses to staffers and loses too much staff time to union activities.

Still, it’s also something of a shift for Republicans to trust the IRS enough to back the new tax compliance measures.

House Republicans opposed similar proposals during a 2014 debate over highway funding, both because they didn’t want to give the IRS extra authority and because they wanted to hold the line on using new revenues to pay for additional spending.

But Rep. Dave ReichertDavid ReichertHouse Democrat expects support to grow for Pacific trade deal Overnight Finance: Senators struggle with spending bill | Obama lifting Myanmar sanctions | Dems turn up heat on Wells Fargo | Panel votes to exempt Olympic medals from taxes Hatch: TPP deal can get done in lame-duck session MORE (R-Wash.) said this week that, “Republicans are all about the rule of law. So people that aren’t paying the taxes that they’re supposed to pay should be held accountable.”

“A compliance measure, for me as an old law enforcement officer, makes sense,” said Reichert, a former sheriff and senior Ways and Means Committee member. “You have to obey the law.”