At ‘Tax Gap’ Hearing, Miss. Senator Questions Diverted Enforcement Funding as Agency Seeks Bigger Budget

U.S. Senator Cindy Hyde-Smith (R-Miss.) today encouraged the Internal Revenue Service (IRS) to end its practice of diverting tax enforcement funding to other agency programs at the same time it is seeking significantly more money to enforce the federal tax code.

In her first hearing as Ranking Member of the Senate Financial Services and General Government Appropriations Subcommittee, Hyde-Smith sought assurances that the increased funding sought by the IRS to improve customer service and code enforcement would be used wisely.  The subcommittee on Wednesday conducted a hearing titled, Internal Revenue Service—Narrowing the Tax Gap and Improving Taxpayer Services.

“While more money always seems to be the proposed solution in Washington, I remain concerned that funding increases marketed as the solution to the tax gap will instead be diverted away from enforcement and squandered on IT projects that have a checkered history of success,” Hyde-Smith said.

“Unfortunately, we have seen the IRS repeatedly call attention to the tax gap, and then divert funds elsewhere,” she said.

According to the “skinny budget” released by the White House, the President will request a budget increase for IRS of more than $1.2 billion to $13.2 billion in FY2022.  The administration has also recommended additional funding for the IRS through various other legislative proposals.

Hyde-Smith’s caution on the increased funding is based on the IRS having transferred $1 billion away from tax enforcement since 2013 to support operations and IT needs.  In fact, the agency plans on transferring another $208 million this summer from supplemental funding provided by Congress last year specifically for enforcement.

“I hope the Commissioner will reconsider this practice and instead today focus on exploring common ground on how to increase compliance with our tax laws and to increase services for taxpayers,” Hyde-Smith said.

Hyde-Smith also questioned IRS Commissioner Charles P. Rettig about:

  • Changes—beyond more funding—to improve customer service with tens of thousands of unprocessed tax returns and less than 14 percent of taxpayer calls answered this year.
  • The agency’s plans for obligating more than 75 percent of the $3 billion in supplemental appropriations provided by Congress after the COVID-19 outbreak that remains unspent.
  • The small percentage of the agency’s 35,000 enforcement staff dedicated to the Criminal Investigations Division.

Hyde-Smith also asked Rettig to respond to the Mississippi congressional delegation’s concerns about a large backlog of unprocessed 2019 tax returns for constituents.

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Release from Senator Cindy Hyde-Smith.