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Wednesday, May 24, 2006
Smart Spending
It turns out that a seemingly small budget cut to the IRS results in lost tax revenue many times over. Senate Finance Committee ranking member Max Baucus estimated earlier this week that a 1 percent cut to the 2006 IRS budget -- an amount of $100 million -- will actually cost the Treasury roughly $1 billion in lost tax collections.
As Commissioner Mark Everson reported earlier this month, and as a GAO report from 2003 indicated, each dollar spent raises approximately $11 - $13 of revenue. Sen. Baucus stated, At a time when the U.S. is struggling to close the annual $345 billion tax gap, it's clear that the 2006 across-the-board budget cut is hamstringing their efforts even further. Commissioner Everson's estimates confirm that even small reductions in collection and taxpayer services are penny-wise and pound-foolish. Sparing the IRS budget may be the best way to bring in more owed revenue and end deficit spending.
Well Baucus, it may be one way, but there are other ways to keep the deficit down too. One would be to retain the estate tax. Another would be to implement full PAYGO laws. Closing the tax gap is certainly an important goal, but it is one piece in a very large puzzle.
Posted by Becky Lewis
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