IRS Wants More of Your Taxes. For Itself.

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By Caroline Baum

(Corrects description of IRS funding in fourth paragraph.)

I bet you didn't know you had a taxpayer advocate at the Internal Revenue Service. Her name is Nina Olson, and she submits an annual report to Congress.

The 2012 report features some of the standard statistics popularized by tax-policy think tanks every April 15:

-- U.S. taxpayers spend more than 6.1 billion hours a year complying with the 4-billion-word tax code.

-- About 60 percent of taxpayers pay a professional to do the honors; another 30 percent rely on commercial software.

Then there are some tidbits only the IRS could provide:

-- Last year, the IRS had a backlog of more than 1 million pieces of correspondence.

-- Only two of three callers looking for a real person actually connected with one.

Nina (if she's my advocate, can I call her by her first name?) says tax complexity is the No. 1 problem facing U.S. taxpayers. No. 2 is the Alternative Minimum Tax. And guess what No. 3 is? "The significant and persistent underfunding of the IRS," which is the chief cause of taxpayer problems.

The call for more funding would have been no surprise to the Nobel Memorial Prize winner James Buchanan, who died last week at the age of 93. The father of public-choice theory, Buchanan understood that government officials act in their own self-interest, just like agents in the private sector. He certainly would have agreed with Nina that tax complexity and grotesque loopholes are big problems for the U.S. As a supporter of a flat tax, though, he most certainly would not have recommended a bigger IRS budget as the solution.

Sorry, Nina. You let me down. I'll have to find someone who really advocates for me.

(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)

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-0- Jan/17/2013 00:30 GMT