Penny-wise and pound-foolish on taxes, IRS funding
To the Editor:
Republican critics of government operations often say that if we ran it like a business, matters would be much better off.
This raises the question of why the first bill passed by the now Republican controlled U.S. House of Representatives is to repeal the portion of the Inflation Reduction Act passed by the last session of Congress and signed into law by President Biden that provides approximately $80 billion to the IRS over a 10-year period. The problem to be addressed is that we have an ongoing problem with a “Tax Gap” which is the difference between the amount of tax owed by taxpayers for a given year and the amount that is actually paid timely for that same year. The most recent estimate of this gap I found is around $441 billion for the tax years 2011-13. In business terms, this is an accounts receivable problem, that is to say, money due for services provided has not been collected.
So, how would a competent business person solve this problem? I expect that he/she would come up with a series of activities designed to improve collections like those outlined in the Inflation Reduction Act that fit the special circumstances of the organization and implement them. The expectation is that if properly implemented, they would produce a positive ROI (Return of Investment), in other words, how many dollars do you expect to receive for each dollar spent in improving your collection efforts. The Congressional Budget Office estimated that this $80 billion increase in funding would yield additional revenues totaling $207 billion over 10 years. This estimate would result in a ROI of approximately 2.6 meaning $2.60 for each dollar spent. It should be noted that the CBO estimates generally are very conservative.
The Republican approach is to forego the investment and ignore the accounts receivable amount and allow it to continue growing. I believe that in the business world this would be interpreted as a management failure and result in a loss of employment.
Stephen Anfinson, Whittier