Political Animal


January 13, 2012 2:15 PM Penny wise, pound foolish

By Steve Benen

Suzy Khimm offers a great example of budget cuts costing, not saving, us money.

The Internal Revenue Service got hit with a 2.5 percent budget cut for 2012, paring back money for tax enforcement even as tax compliance has gotten worse. The agency got $300 million less than in the previous year — including $193 million less for tax enforcement.

The IRS estimates that every additional dollar spent on enforcement brings in about $4 to $5 dollars of additional revenue, which would mean that the 2012 budget could lose taxpayers anywhere from $772 million to $965 million — more than twice what it originally saved through the cuts to enforcement. As a result, the recent IRS budget cuts would actually be contributing to the deficit, according to Nina Olson, who runs an independent watchdog for taxpayer advocacy within the IRS. According to Olson’s latest report to Congress, the budget cuts combined with the IRS’ growing workload have become “the most serious problem facing U.S. taxpayers.”

The agency, the report (pdf) said, “lacks the resources to maximize revenue collection, thereby exacerbating the federal budget deficit.”

Every time something like this comes up, I think a Senate hearing from June in which Sen. Rand Paul (R-Ky.) seemed flabbergasted by the notion that the government can actually save money through specific kinds of investments. “The idea or notion that spending money in Washington somehow is saving money really flies past most of the taxpayers,” he said at the time.

Understanding this just requires a little bit of thought. If we cut spending on volcano monitoring and tsunami warnings, we save a little money on maintenance, but pay a lot of money on damage repairs after disaster strikes. If we cut spending on food safety, we save a little money on inspection, but pay a lot of money on health care costs when consumers get sick. If we cut spending for the Securities and Exchange Commission, we save a little money on enforcement, but pay a lot of money to clean up financial catastrophes.

And for every dollar the IRS spends on audits, liens, and property seizures, the government brings in much more. If we spend less on IRS enforcement, as Republicans demand, it costs us more.

The “penny wise, pound foolish” idiom has been around for a long while for a reason.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.


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  • just bill on January 13, 2012 2:28 PM:

    for these morons, this isn't about the budget. it's about keeping those damn irs agents away from their fat cat friends so they aren't as apt to get caught cheating.

  • Hedda Peraz on January 13, 2012 2:31 PM:

    To paraphrase the estimable Ben Franklin, "A penny saved is a dollar earned".
    That is, when the penny is saved from the IRS budget, and the (tax)dollar therefore stays in my pocket.
    -Ain't America grand?

  • ceilidth on January 13, 2012 2:31 PM:

    And if you know that the IRS might actually audit you, chances are you will be just a little bit more honest about your income and deductions.

  • Gummo on January 13, 2012 2:34 PM:

    But the Rethugs are anti-government and anti-taxes so hampering the IRS is a win-win for them.

  • Mnemosyne on January 13, 2012 2:34 PM:

    I remember this happened in California when (thankfully former) Gov. Schwarzenegger proposed cutting home care for Medi-Cal patients out of the budget, only to have to back down when it was pointed out to him that all of those patients would have to be put into nursing homes, which would cost the state far more than providing home care. Apparently he had no idea that those patients wouldn't just magically vanish if he cut them out and would actually require continuing care if their home health aides were taken away.

  • SYSPROG on January 13, 2012 2:36 PM:

    Didn't you read the report yesterday that since 2005 the IRS hasn't been able to collect over 130 BILLION in taxes that are due? Mostly from corporations? Obama has been cracking down on the deadbeats and now the IRS get less money for enforcement? C'mon. FOLLOW THE MONEY...or lack of it.

  • Emile on January 13, 2012 2:44 PM:

    Isn't Rand Paul an eye doctor? Hasn't he ever advised patients to come for yearly checkups (spending a little money) so they can catch ailments early and prevent them from turning into costly treatments?

    Would this guy have ever become even a garbage collector let alone doctor and senator had his Daddy not been a US representative?

  • Texas Aggie on January 13, 2012 2:44 PM:

    The point of the whole exercise isn't to save taxpayer money. The reason is to save 1% money by allowing them to underpay their taxes with no fear of getting caught. This should be obvious. Even a simpleton like Rand Paul understands this.

  • Peter Pitchford on January 13, 2012 3:05 PM:

    Wouldn't it be great if Obama would come out and speak the truth?

    "My fellow Americans, this $193 million cut will actually cost us three quarters of a billion dollars. What could possibly be the real motivation behind these cuts? Just follow the money: they only make economic sense to tax cheats. Its obvious to me that the only reason they are even on the table is that those advocating these cuts are protecting tax cheats from government audits."

    Its just that simple.

  • CDW on January 13, 2012 3:23 PM:

    I had occasion to call the IRS this week about a mistake I made last year on my return. It was a mistake that worked in my favor and, naturally, I wanted to know what I had done wrong, which is something you can't find on the irs web site. After spending between 5-10 minutes listening to all the recordings and running into dead ends, I finally pushed a button that got me to the place where I could speak to a person, but there was a long wait.

    I gave up after another 10 minutes and called the irs line for businesses where - you guessed it - I got through quickly to a live person who found someone who could help. I felt sure the non-existent service for individuals was a byproduct of budget cuts and cursed everyone in DC while I was on hold. I shudder to think what it will be like come the end of March and first 2 weeks in April.

  • zandru on January 13, 2012 4:14 PM:

    Funny ...

    ... how the same folks who live by the maxims "You get what you pay for" and "You have to spend money to make money" suddenly become miserly cheapskates once they get into government service ...

  • Kathryn on January 13, 2012 5:22 PM:

    Rand Paul is stupendously stupid, he's the joker who whined on and on at a Senate hearing about his inefficiently flushing toilets which he blamed on regulations regarding using less water for the job. No doubt little Paul bought the cheapest toilets he could find. Kentucky has them some fine U.S.senators. The father is nuts but not totally stupid, but the son appears to be a dimwit and a whiny one too. Don't see him as a future GOP star, though it is a low bar.

  • Rick B on January 13, 2012 6:48 PM:

    Actually there is nothing new about this.

    My mother worked for the IRS for over a decade in the60's and 70's and it was well known that for every additional dollar the IRS was given for enforcement revenue increased from $10 to $30. Congress simply never wanted the IRS to be efficient at enforcing the law.

    As @Texas Aggie points out above, this is part of the control the 1% has and has long had on the government.

  • Patango on January 13, 2012 10:47 PM:

    Another example of obama bowing to the wingers in hopes they will hate him a little less , then the dems bend over and allow cuts to heating assistance and unemployment bennies because revenues are still down , looking forward to dems acting like dems for at least a year now ....Then hopefully not caving and giving it all back when no one is looking ...

  • pj in jesusland on January 14, 2012 4:09 AM:

    . . . And if DOE issues loan guarantees to private sector funding consortia to develop solar and wind energy farms we save double. We save directly by reducing our petroleum imports and we also save on the wars America would otherwise fight by funding terrorists with our petrodollars.

  • pj in jesusland on January 14, 2012 4:16 AM:

    You know how Republicans always whine about the graduated income tax and how it penalizes the wealthy by making them pay far more than the poor even though (so they claim) the wealthy use far fewer resources?

    Then Republicans wouldn't argue with a Flush Tax, would they? We should put flush meters on the toilets of every American house, apartment and business and tax people a flat fee per flush.

    This way, people who are full of crap would pay their fair share.

  • giantslor on January 14, 2012 4:18 AM:

    Also it costs more to go after the big fish. With a reduced budget, it's easier to go after the low-hanging fruit, meaning the middle and working class.

  • DFH on January 14, 2012 7:59 AM:

    What I hear day after day on Limbaugh and Beck and on XM in the car (even on MSNBC, channel 117 on SiriusXM) are the commercials bellowing that the IRS is gearing up to come after you, so you'd better buy this certain brand of "pill" for your own protection against the jackbooted IRS thugs coming to take you away, ha ha hee hee. (My job forces me to listen/hear/avoid/cringe to right wing talk radio.) Ironic that while enforcement is being cut to benefit the 1%, the idiot segment of the 99% is still being poked into being afraid and angry.