May 31, 2005

68 Taxpayer Assistance Centers to close

Over the opposition of Taxpayer Advocate Nina Olson (background) and Senator Baucus, the IRS plans on closing 68 Taxpayer Assistance Centers (TACs). This has got to be seen as a blow to simplicity and fairness in terms of how the IRS conducts business. The ostensible reason is decent, to put more money into enforcement, which is in crisis. But the cost is unfortunate.

From BNA's Daily Tax Report (subscription required):

Rep. Major Owens (D-N.Y.) whose district includes a walk-in center slated for closing, said in an NTEU telephone news conference May 27 that the closures will be damaging. The Brooklyn center is "swamped" with questions from taxpayers, and many of its users are not computer-literate. He said he will be working to garner support for an amendment in an appropriations bill to block the cuts. At least two other congressmen have already opposed the closures. Reps.
Charles Rangel (D-N.Y.) and Ron Lewis ( R-Ky.) in an April 11 letter to Everson referred to the administration's proposed $134 million decrease in taxpayer services, noting the IRS Oversight Board recommended additional funding of $111 million instead of cuts.

The walk-in centers are crucial for helping people who don't have access to a personal accountant or tax attorney get a handle on their tax forms. "Everson" is IRS Commissioner Mark Everson, who got tagged as the spokesman for announcing the cuts. This situation immediately highlights one clear issue: the confusion associated with taxes. Millions use these centers. In all likelihood, if they are anything like the DMV (I'm imagining a mid-April crunch), folks don't get in a line because they want to. They get in line because they need assistance with the forms and can't afford, as millions of other Americans can, professional assistance. But there is pretty much broad agreement that the "tax help" industry has become too large. It wouldn't have sprung up without the demand.

The second issue, and Congressman Owens hits this, is the digital divide. In his statement, Everson says that more people are filing online. Unfortunately, that option is only possible for a fraction of the population. A spring 2004 Pew study showed that only 34% of adult Americans have internet access, with only 24% on high-speed. In other words, it's good that the IRS is paving the way for more online filing, but right now, it can only be part of the solution. And I'm sure that only a fraction of the 34% feel comfortable enough with the internet to shop, let alone file their taxes.

When corporations don't pay their fair share, on the federal or state level, and when people cheat on their taxes, the costs shift down onto honest taxpayers. Fairness requires that the IRS must be funded well enough to do its job properly. When it gets underfunded, like it has been, more loopholes get exploited and more taxes, personal and corporate, get evaded. The inflated rates (inflated to make up for lost revenue), get passed on to the rest of us, and that's not fair. The message is simple: tax evasion is not a victimless crime. It has a broad-based impact. Congress should do what it can to allow the IRS to enforce the laws that it sets for it, and to help honest taxpayers easily file their taxes. This funding cut is a step in the wrong direction. What's more, well-directed funding for enforcement and compliance aid, over time, would pay for itself in made up revenue. Who knows? If done well enough, it could even lead to broad-based rate reduction for everyone. Call it the "fairness dividend."


At 7:22 PM, Anonymous squarestater said...

Closing the tax service centers? Are they still directing more resources to catch the EITC scofflaws? Meanwhile, they will probably be renting out the old centers to HR Block.


Post a Comment

<< Home