Political Payback: IRS Slapped With Budget Cuts

In a rare show of contempt for the Internal Revenue Service, Congress took a meat cleaver to the agency's 2014 spending scheme, carving $1.7 billion from the president's proposed budget.  The move, orchestrated by Republicans, is political payback for the targeting of conservative groups.

Under the recently approved budget, IRS funding for this year was sliced to $11.3 billion.   That is less than the agency spent in 2013 and lowers the budget to 2009 levels.   No politician rushed to defend the unpopular agency's budget, including Democrats and President Obama.

The IRS became a target after jack-booted workers caused a political firestorm in 2013 by harassing conservative groups seeking tax exempt status.  To underscore its budget message, Congress inserted language to limit the agency's ability to "target citizens for exercising their First Amendment rights."

Treasury Secretary Jack Lew, whose department includes the IRS, wanted to beef up the already bloated budget in order to triple the size of the workforce dedicated to the president's health care reform from 700 to 1,954 employees.  

The IRS has one of the government's largest workforces, 87,000 people. The agency accounts for nearly 90 percent of the Treasury Department's payroll of 101,000 employees.  For some perspective, more than one-half of the Fortune 500 companies have smaller payrolls than the tax agency.

Slashing the agency's budget will not cripple the the IRS' role in enforcing Obamacare as some claim.  Duplicitous Democrats made sure of that when they authorized a slush fund for the IRS as part of the health care reform law.  

The clause creating the fund was buried deep in the legislation to keep it hidden from the public.  As of the end of last year, the government had already funneled about $1 billion into the fund, officially called the Health Insurance Reform Implementation Fund.

The boodle has attracted the interest of the Treasury Inspector General for Tax Administration.  The inspector general found the IRS could not account for $67 million stashed in the fund.  The report, dated September 18 of last year, cited several other abuses involving taxpayer funds.

The news media has turned a blind eye to the abuse.  Meanwhile, the IRS continues to milk the slush fund as it ramps up to play the triple-threat role of accountant, enforcer and paymaster for the president's signature legislation.

Under Obamacare guidelines, the IRS will be charged with verifying whether an individual has health coverage and collecting penalties from those who fail to purchase coverage.  The agency is empowered to withhold future tax refunds from those who don't pay for health insurance.

The agency's power extends to overseeing businesses with 50 or more employees, ensuring the firms provide government-approved health coverage to workers.  The IRS will have the authority to levy and commandeer penalties from negligent employers.

To police the purchase of health insurance, the IRS will collect massive new amounts of personal health information from virtually every American.  Insurance companies will be required to report the names, addresses, identification numbers and health policies purchased by every citizen.

Furthermore, the agency has the legal clout to pay subsidies to individuals who purchase health insurance, based on a financial means test. The Congressional Budget Office (CBO) projects the IRS will dole out more than $1.1 trillion over the next decade in subsidies and other funds.

On that last point, flaws already have been uncovered in the IRS platform to determine subsidies.  In a report late last year, the Treasury Inspector General for Tax Administration performed a system audit and found "critical" security controls failed during the testing.

"The IRS's existing fraud detection system may not be capable of identifying refund fraud or schemes prior to the issuance of tax return refunds," the auditors wrote in their report.  The inspectors called for wholesale changes to be made prior to the issuance of subsidies.

In light of all these revelations, Congress should have done more than just cleave $1.7 billion from the agency's budget.  Legislators should have abolished the Internal Revenue Service.