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The costly toll of budget cutting

Published Oct. 16, 2005

This capital is perpetually awash in numbers, and numbers numb the mind. At the risk of losing you this instant, let me mention two numbers that may stun you. First: Individuals and corporations owe the government at least $60-billion in taxes that remain unpaid in large part because the government does not have the resources to collect these debts.

Second: In the past 10 years, the percentage of tax returns being audited for accuracy and honesty has fallen by half. This year, for the first time, there are staff and money to check only one return in 100.

These facts were given me last week by Rep. Jake Pickle (D-Texas), who is holding a hearing Tuesday in his Ways and Means subcommittee on the shaky health of the Internal Revenue Service. The facts are not disputed by the IRS.

The tax-collection agency is a prime example of the "hollow government" problem I have written about previously in this column. "Hollow government" is what results when the bureaus and departments are systematically starved of the funds, the equipment and the people needed to perform their assigned tasks.

The new IRS Commissioner, Fred T. Goldberg Jr., told me that the "feast and famine budgets of the '80s" have left the agency with a staff "that is unable to keep up with our work." Overall, he said, the IRS staff has grown 10 percent in the past decade. But it happened by fits and starts, with expansions followed by hiring freezes.

Meantime, the volume of collections grew 45 percent and whole new functions _ including the monitoring of drug-money laundering _ were added. In the middle of last year, the agency was $360-million over its spending ceiling, so travel was slashed, supplies not replenished. "You can't manage an agency that way," he said.

Pickle and Goldberg disagree on some points, but the veteran Democratic legislator from Austin and the staunchly Republican commissioner from Yale are as one in saying that the IRS is now so hobbled by scarce resources that billions in taxes are being missed and basic monitoring of tax returns is being skimped. Ultimately, taxpayer confidence in the fairness of the whole system is jeopardized. In the last six years, for example, the number of delinquent accounts has doubled and so has the estimated amount of uncollected taxes, reaching the $61-billion figure Pickle uses and Goldberg says is a reasonable guess.

No one thinks the full amount owed could be collected in a single year, but the sums involved are so enormous they have become a focus of attention for both Congress and the administration. Whatever the precise figures, they dwarf the annual deficit reductions achieved, after bitter battling, under Gramm-Rudman-Hollings. And we're not talking here about raising taxes _ just collecting what the government is owed.

Even President Bush grasps the point _ now. After ridiculing Democratic nominee Michael Dukakis for pointing to the "tax collection gap" and after smugly telling campaign audiences that "I don't agree with his vision of America where the government has a hand in every pocket and a tax agent in every kitchen," Bush in his first budget as president is asking to boost funds for the IRS by more than 11 percent and to add 3,667 staff people to improve enforcement.

He's counting on that $635-million and a better use of existing resources to bring in an additional $3-billion in revenues next year _ a 5-1 return that, if realized, just underlines how penny-wise and pound-foolish it has been to keep the IRS on a starvation diet.

With rare exceptions, the government has only six years in which to collect on an individual's or company's tax assessment. Since fiscal 1987 alone, Pickle says, more than $5.4-billion has been written off because the government couldn't get around to collecting.

This is surely a case where even the most obtuse can see how costly "hollow government" is.

I erred in saying in the last column that 85-million registered voters did not vote in 1988. That figure refers to non-voters in the potential electorate of citizens over 18.

Washington Post Writers Group