Republican presidential nominee Bob Dole decries the excesses of an Internal Revenue Service that is “twice as big as the CIA and five times as big as the FBI.”
Reform Party candidate Ross Perot promises to abolish the IRS “as we know it.”
House Ways and Means Committee Chairman Bill Archer, R-Texas, says he’s determined to “get the IRS completely and totally out of every individual’s life.” And House Majority Leader Richard K. Armey, R-Texas, wants to “bring the IRS down to just a veritable shadow of its existing self.”
If elected, Dole promises, he’d cut the agency’s budget by 10 percent, ban the use of “abusive” auditing methods, grant a one-year tax amnesty for those who haven’t paid back taxes and eliminate the need for 40 million taxpayers to file a return.
“We’re going to downsize the IRS and upsize the amount of money Americans get to keep,” Dole promises in campaign speeches.
What’s driving this assault?
The sheer hassle level for taxpayers is one factor. Archer estimates that the total cost to individuals and businesses of complying with the tax code exceeds $300 billion a year. The Tax Foundation, a conservative Washington think tank, puts the figure at $200 billion.
But University of Michigan economist Joel Slemrod says those estimates exaggerate the value of taxpayers’ time. He calculates the cost to be about $75 billion, or about 6 percent of the $1.3 trillion in total revenue collected from all sources by the IRS last year.
Several recent developments also have contributed to a perception that the IRS just can’t get it right:
The agency drew criticism from some GOP lawmakers last year because it delayed more than 7 million tax-refund checks for as long as two months to check discrepancies in Social Security numbers in government records and those reported by individual taxpayers.
Two weeks ago the agency scrapped its Cyberfile system, a $17 million project designed to let taxpayers use personal computers to file their returns directly to the IRS. The General Accounting Office, Congress’s investigative arm, found that the agency lacked the technical expertise to run the system.
The GAO also found that the IRS could not reconcile totals for revenue and refunds on its ledgers and could not account for a large chunk of its $3 billion in non-payroll operating expenses.
In January, the GAO said the IRS was largely incapable of fielding taxpayers’ questions about their returns. Over a two-week period in 1995, GAO inspectors made more than 2,800 calls to the agency’s taxpayer help line; only 249 calls got through.
“The IRS is the perfect symbol for everything voters think is wrong with Washington,” Republican strategist Frank Luntz said. “It’s intrusive, complicated, penalizing and people think it’s completely out of control.”
Clinton administration aides denounce GOP criticisms of the IRS as partisan cheap shots - fired, they say, in desperation. IRS Commissioner Margaret Milner Richardson sees popular resentment of the tax collector as a constant of human society that reaches back to “prehistoric” times.
In May, Richardson chided GOP Rep. Jennifer Dunn, R-Wash., after hearing that the two-term member of the tax-writing Ways and Means Committee had promised to “make life as hard on the IRS as they’ve made it on you.” In a letter Richardson said she was “more than a little dismayed” by Dunn’s comments and worried about a potential drop in tax compliance.
Even IRS detractors concede that it’s unfair to blame the tax collector for the myriad of complexities written into the tax code by politicians.
Nonetheless, 18 million of the 117 million individual taxpayers who filed in 1995 were able to complete their returns using one-page Form 1040EZ, according to the IRS. Average total time reported for keeping records and completing the form: one hour and 28 minutes.
Another 19 million used the two-page Form 1040A. Total time required: four hours and 35 minutes. About 70 percent of individual taxpayers claimed only the standard deduction last year.
However, more than half of all individuals - including about 7 million who used the 1040EZ and 1040A forms - said they paid someone to help them with their tax returns last year. Reliance on experts may have more to do with fear of making mistakes than the complexity of the forms themselves, tax analysts say.
The IRS fanned such apprehensions last year by launching “financial-status analyses” - dubbed “underwear audits” by some critics - in which agents attempt to measure how much selected taxpayers owe by conducting a detailed study of their spending patterns rather than simply reviewing past tax records.
IRS officials say the reviews affected only a tiny fraction of the 1 percent of all taxpayers who are audited.
Despite these and other issues, U.S. taxpayers have one of the higher rates of compliance in the world, according to specialists. That may be because 83 percent of federal revenue comes in automatically, through employer withholding.
Just because it works doesn’t mean the IRS is popular. Luntz, who monitored reactions of 36 swing voters to speeches at the Republican and Democratic conventions, found that criticisms of the IRS by Dole and Jack Kemp “were the single biggest applause-getters” of any lines.