IRS Gets 24% Budget Cut Under Republicans’ Restrictions

The U.S. Internal Revenue Service budget would be cut by 24 percent under a House Republican proposal that would create new restrictions on the tax agency.

The $9 billion IRS budget proposal, released today in Washington, includes new limits on videos, bonuses and conferences after reports about overspending. The plan would withhold 10 percent of the agency’s enforcement budget until the IRS inspector general confirms that it has implemented all of the recommendations made in a report on the agency’s scrutiny of small-government groups.

“It’s time to clean up the act over there and it’s been a lot of waste,” said Representative Charles Boustany of Louisiana, a Republican on the Ways and Means Committee. “We are going to cut its budget until they come clean. It’ll force them to provide the information in our oversight efforts but also to account for every dime that’s spent.”

Republicans are seizing on the controversy over tougher IRS scrutiny of small-government groups to limit the tax agency, saying they can’t trust the agency’s executives to handle public money appropriately. The budget proposed by Republicans would be the IRS’s smallest since fiscal 2001.

Since the IRS apologized May 10 for giving extra attention to Tea Party groups seeking tax exemptions, the government has replaced at least four executives. Six congressional committees opened inquiries and the Justice Department began a criminal probe.

Shortsighted Approach

House Republicans are planning votes in the next month on several bills in response to the IRS controversy, Majority Leader Eric Cantor of Virginia told lawmakers today, said a leadership aide who asked not to be named because the comment were made in a closed-door meeting.

The bills would make it easier to put executives under investigation on unpaid leave, let people record conversations with federal enforcement officials and tighten rules on government conferences.

The Republican approach on appropriations is shortsighted, said Representative Joseph Crowley of New York, a Democrat on the Ways and Means Committee.

“That’s typically their answer to it -- if there’s a problem, just cut the budget and somehow the problem goes away,” Crowley said. “It’s not addressing the issue.”

Tax Collections

The change may hurt tax collections. Treasury Secretary Jacob J. Lew told lawmakers in May that each dollar spent on IRS enforcement yields $6 for the Treasury. Using that metric, the proposed $1.5 billion cut to enforcement would cost $9 billion in revenue.

“This is about priorities,” Boustany said. “They’ve been very lavish in the waste we’ve seen over there.”

A House appropriations subcommittee will consider the plan tomorrow. The Republican-led House and Democratic-controlled Senate are at a stalemate over the broader budget for fiscal 2014.

An inspector general’s report criticized IRS spending on conferences, including a $4.1 million training event in 2010 that included an artist as a paid motivational speaker and a video parody of the “Star Trek” television show and movies.

The 24 percent proposed cut is compared with the agency’s current $11.9 billion budget. The IRS is spending less than that because of across-the-board federal spending cuts that are prompting at least five agency-wide furlough days this year.

The IRS had requested a $1 billion increase for 2014.

In addition to the investigations into the scrutiny of nonprofit groups, Republicans may consider other legislation. One option, Boustany said, is a bill that would remove the agency from its role in enforcing the 2010 health-care law.

“This bill right-sizes federal agencies and programs that are simply not working efficiently or effectively, while investing in programs that directly serve the American people,” Republican Representative Hal Rogers of Kentucky, chairman of the Appropriations Committee, said in a statement.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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