The Internal Revenue Service avoided a $600 million budget cut proposed by House Republicans, preventing changes that could have cost the government $4 billion in uncollected revenue.
Under the proposed spending bill released today, the IRS budget for fiscal year 2011 would be $12.1 billion, or 0.2 percent less than in fiscal 2010. That level would subject the IRS to the same across-the-board funding cut as all domestic, non-defense agencies.
The legislation would deny the IRS a $486 million budget increase it had sought as it tries to improve enforcement of tax laws aimed at wealthy individuals and multinational corporations. House Republicans touted the denial of the IRS increase when they announced the budget agreement with the administration April 8.
The IRS didn’t respond to a request for comment today. Commissioner Douglas Shulman said last month that IRS budget cuts would be counterproductive, because they would reduce revenue from tax collections. He estimated that the loss would be $4 billion.
Senator Carl Levin, a Michigan Democrat who has called for the IRS to be more aggressive in pursuing offshore tax evasion, said Congress should give the agency more resources.
‘Going to Hurt’
“It’s going to hurt,” he said. “I think it’s a mistake. We ought to be increasing their enforcement budget instead of decreasing it.”
Levin praised the agency’s recent focus on collections from wealthy taxpayers as an appropriate targeting of the “big fish.” He said that spending on tax enforcement generates a favorable return on the investment.
“There’s too little emphasis on revenue as far as I’m concerned, and too much emphasis on cutting spending in terms of our budget deliberations,” he said.
The anticipated decision by Congress to limit the IRS budget to $12.1 billion for 2011 will force a bigger debate over the 2012 budget request, because there will be a bigger-than- usual gap between current funding and Obama’s request. The agency requested $13.3 billion for the fiscal year that starts Oct. 1.
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