|
Tuesday, January 09, 2007
Taxpayer Advocate Says AMT Top Priority
The taxpayer advocate service (TAS), an independent office within the IRS, put out the taxpayer advocate's annual report to Congress today (click here for the executive summary). The TAS decided that the most important issues facing taxpayers this year is the alternative minimum tax, followed by the "tax gap." Its top legislative priorities: creating a special procedure for IRS appropriations, and repealing the IRS privatization program.
There's a summary of the top legislative priorities after the break.
1. Revise Congressional Budget Procedures to Improve IRS Funding Decisions. Under existing congressional budget procedures, the IRS is grouped together with the rest of the Department of the Treasury, the Department of Transportation, the Department of Housing and Urban Development and other agencies, and spending for all these programs must fit within a pre-established dollar cap. As a result, the IRS competes dollar-for-dollar against many other federal programs for resources. This procedure makes little sense. The IRS is the Accounts Receivable Department of the federal government. On a budget of about $10.6 billion, the IRS currently collects about $2.24 trillion a year. That translates to an average return-on-investment of about 210:1. If the federal government were a private company, its management clearly would fund the Accounts Receivable Department at a level that it believed would maximize the company's bottom line. Since the government is not a private company, maximizing the bottom line is not — in and of itself — an appropriate goal. But the public sector analogue should be to fund the IRS at a level that would maximize tax compliance, especially voluntary compliance, with due regard for protecting taxpayer rights and minimizing taxpayer burden. As the IRS has come under increasing pressure to close the "tax gap," it should be recognized that the IRS suffers from a "resources gap," and the IRS's lack of resources is a significant impediment to its ability to close the tax gap and thereby to reduce the federal budget deficit.
2. Repeal Private Debt Collection Provisions. The American Jobs Creation Act of 2004 authorized the IRS to enter into qualified collection contracts with private collection agencies. In the 2005 Annual Report to Congress, we discussed how the complexity of federal tax law would impose heavy costs and burdens on the IRS to ensure that taxpayer rights would be fully protected. In the Most Serious Problem section of this report, we address both the lack of a sound business case and lack of a tax administration case for the PDC initiative. As discussed in the Most Serious Problem, True Costs and Benefits of Private Debt Collection, the National Taxpayer Advocate recommends the repeal of IRC § 6306.
Posted by Matt Lewis
|