IRS Budget Sliced 13% as U.S. House Constrains Tax Agency

The U.S. House of Representatives voted to cut the Internal Revenue Service’s budget by $1.14 billion in another blow to the tax agency.

The action came late yesterday in a pair of votes on amendments offered by Republicans Paul Gosar of Arizona and Bill Huizenga of Michigan. Both proposals were passed by voice vote as part of a broader spending bill slated for passage as early as today. A voice vote means that lawmakers aren’t on the record supporting or opposing the cuts.

The changes would leave the IRS with a budget of $9.8 billion for the fiscal year that starts Oct. 1, 13 percent below this year’s funding level and 21 percent below the administration’s request.

Huizenga said he’s trying to use the spending limit to force changes at the IRS, maintaining that the cuts will make the agency focus better and contending that the “arrogance” of IRS Commissioner John Koskinen is a sign of the agency’s troubles.

“This is about priorities,” Huizenga said in a telephone interview today. “And this is about screwed-up culture at the IRS and I was trying to send that message.”

Adoption Credit

In particular, Huizenga cited the frequent audits of people claiming a credit for adoption of children. The National Taxpayer Advocate found that 69 percent of people claiming the credit were audited in 2012 and more than half of those audits ended with the government getting no additional money.

Democrats, who have supported the agency and said the cuts would enable tax cheating, allowed the amendments to be adopted without forcing a roll-call vote. That prevented members in both parties from having to take a position.

“While absurd on the merits, these amendments hold political appeal and would have won recorded votes,” said Matt Dennis, a spokesman for Democrats on the House Appropriations Committee. “Democrats will fight to restore funding needed to hold tax cheats accountable and help honest taxpayers in need of assistance.”

A Senate appropriations subcommittee wrote a bill providing a 2 percent increase for the IRS. The full appropriations panel hasn’t voted because of a dispute over amendments, and the IRS issue is likely to become a point of contention as Congress tries to complete its funding bills. The next fiscal year starts Oct. 1.

Enforcement Budget

Gosar’s amendment reduces $353 million and Huizenga’s proposal cuts an additional $788 million, both from the IRS’s enforcement budget.

“The list of scandals and examples of mismanagement within the IRS seems to grow every day,” Gosar said in a statement. “This agency, which aggressively pursues American citizens it believes deserve extra scrutiny, must understand that the IRS is first and foremost accountable to the American people, not the other way around.”

Administration officials have said that additional enforcement spending yields a return of as much as $6 for every dollar spent. The Obama administration has said the president would veto the measure if it were passed.

Representative Steny Hoyer of Maryland, the second-ranking Democrat in the House, said he was confident the Senate wouldn’t let the cut stand.

The National Taxpayer Advocate, the IRS Oversight Board and the union representing IRS employees have called for the agency to receive more funding, partly to cover the increased costs of enforcing the 2010 health-care law and a foreign tax compliance law that took effect July 1.

‘Reduced Services’

“In the past four fiscal years, the IRS budget already has been cut by $1 billion, leading to the loss of 10,000 employees and sharply reduced services to taxpayers,” Colleen Kelley, president of the National Treasury Employees Union, said in a statement today.

“I find it particularly discouraging that elected officials would engage in political gamesmanship at a time when the pressing need is to rebuild the IRS and its workforce, not seek to starve it of the resources it requires to meet its mission,” Kelley said.

The IRS has been under congressional scrutiny for more than a year since it said it had given extra attention to small-government groups seeking tax-exempt status.

That revelation started a criminal inquiry, prompted congressional investigations and led to the departure of several of the agency’s senior leaders.

The bill is H.R. 5016.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Erik Wasson in Washington at ewasson@bloomberg.net

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

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