Internal Revenue Service
The Internal Revenue Service (IRS) is the tax collection and enforcement agency of the United States Treasury Department.
Many libertarians have called for abolishing the IRS. Anarcho-capitalists call for completely abolishing the federal government, which would eliminate any need for federal taxes. Some minarchists favor a program of drastic tax reform that would put the states in charge of collecting federal taxes. For example, many states already collect sales taxes for their own purposes, so it would be administratively simple for them to increase the sales tax rate by a few percentage points and give those extra revenues over to the federal government, perhaps with an agreed-upon fee deducted for carrying out the service of tax collection.
By its own admission, the service the IRS provides to taxpayers has been getting worse. In 2012, it failed to reply to correspondence within the time specified by its own rules almost half the time. Between 2004 and 2012 the proportion of calls on its toll-free line it managed to answer fell from 87% to 68%, and the average wait rose from 3 minutes to 17. In 2013 it was doing even worse. On April 15th, the day tax returns are due, it only answered 57% of calls. That matters, since “voluntary compliance”, as opposed to chasing delinquent taxpayers, brings in more money at less cost. The IRS is also doing less chasing: the odds of an individual receiving a full audit fell to just 1 in 360.
Money is part of the problem: since 2010, the IRS’s budget has been cut by 8%, as has its staff. To help make the required savings, the IRS is shutting up shop on five days over the summer. By the end of 2013 it will also have cut its training budget by over 80%. As the Taxpayer Advocate, an ombudsman, points out, cutting the IRS’s budget to reduce the deficit is misguided, since the more the agency spends, the more money it brings in.
The main reason why Americans dislike dealing with the IRS is not, however, the bureaucrats’ fault. Congress keeps making the tax code more complex. It is now 4m words long, and has been changed over 4,000 times since 2001 (see table). Americans spend 6.1 billion hours a year complying with it—enough work to keep over 3m people employed full-time without producing anything. Nearly 90% of filers pay for help with their returns. The cost of all this is equivalent to 15% of the tax raised, the taxpayer advocate reckons. This too, is self-defeating, in that it discourages compliance.
- "Who will tame the taxman?", The Economist, print edition, May 25th 2013. Referenced 2013-05-31.
- "The Attack on Accidental Americans" by Wendy McElroy, September 2011
- "Should the IRS Audit More Taxpayers?" by George C. Leef, May 2006
- Why is Catching a Baseball Taxable Income? by Justin Ptak, August 2007
- Turn your friends over to the revenuers and get rich by Jeffrey Tucker, December 2007
- GAO Finds Serious Flaws in IRS Controls by Stephen Taub, November 2005
- "The Curse of the Withholding Tax" by Laurence M. Vance, April 2005
- The IRS Targets Conservatives, The Wall Street Journal, May 2013
- Internal Revenue Service at Wikipedia