Baucus Warns that IRS Budget Cut May Cost Not Save

U.S. Senator Max Baucus (D-Mont.

), Ranking Member of the Senate Finance Committee, says that the 1% cut in the 2006 budget of the IRS will actually cost the U.S. Treasury $1 billion in lost tax collection.IRS Commissioner Mark Everson recently reported that the funding rescinded in last year's Defense appropriations bill could have provided for the closure of 88,000 additional collection cases and 25,000 by-mail audits.Baucus quotes a 2003 Government Accountability Office report that indicated that there would be substantial returns on the dollar for the kinds of enforcement activities that Everson reports have been cut from the budget for the year.

"At a time when the IRS 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," said Baucus."Commissioner Everson's estimates confirm that even small reductions in collection and taxpayer services are penny-wise and pound-foolish," he continued. "Sparing the IRS budget may be the best way to bring in more owed revenue and end deficit spending.".The IRS estimates that the direct return on each dollar of its budget is four to one. Phone calls to follow up on tax debts are estimated to return $13 dollars to every dollar spent.

Mail audits are estimated to return as much as 11 dollars for every dollar spent.Baucus says that when you use the overall rate of four to one return, this year's $100 million budget cut translates to a loss of $400 million. But using the estimates from the 2003 GAO report, he explains that the losses from the cut could reach $1 billion or more.

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By: Martin Lukac