Washington, D.C.–U.S.
Senator Mike Crapo (R-Idaho), Ranking Member of the U.S. Senate Finance
Committee, delivered the following remarks at a hearing entitled, “The IRS’s
Fiscal Year 2022 Budget.”
The text of Ranking Member
Crapo’s remarks, as prepared, is below.
“Thank you Mr. Chairman, and thank you Commissioner
Rettig for joining us again today.
“It is safe to say we all support efforts to
administer our nation’s tax laws and collect taxes that are legally due.
“Today, we will hear from Commissioner Rettig about
proposals to massively increase the budget at IRS, aimed largely at increased
compliance and enforcement efforts.
“Commissioner Rettig, you have the chance to provide
your perspective on an array of issues, including any updated tax-gap analysis
your Agency is preparing, various compliance- or enforcement-related proposals
contained in the President’s budget and recently-enacted spending programs that
the IRS will soon begin implementing.
“Focusing on the Administration’s discretionary
funding request for the IRS, I look forward to hearing about how the IRS would
spend the $1.2 billion in additional funding in FY 2022, including the specific
activities the funds would go toward and what the expected outcome from these
activities will be.
“The President’s Fiscal Year 2022 Budget proposes
not only a significant increase in IRS funding, but also a dedicated, mandatory
flow of funding for the IRS over a ten-year period, based partly on some
speculative and questionable assumptions and analysis.
“Multi-year, guaranteed appropriations like this are
rare, and it is important to understand whether the circumstances actually
warrant it.
“It is also
important to understand how much additional funding the IRS can efficiently
use, as well as the specific implementation plans the IRS has to put any
additional funding it receives to good use.
“Much has been said about the decline in IRS funding
from the 2010 fiscal year.
“Less has been said about data suggesting the IRS
has become at least somewhat more efficient in the aftermath of these declines,
such as the fact that IRS gross revenue collections have increased every year,
year-over-year since 2010, from $2.34 trillion in 2010 to $3.56 trillion in
2019.
“Further, the IRS’s costs of collection have
decreased every year, year-over-year since 2010, from $0.53 in costs per $100
collected in 2010 to $0.33 in costs per $100 collected in 2019.
“Moreover, we need to better understand the actual
correlation between the IRS’s enforcement budget and the enforcement revenue it
collects.
“For example, IRS data shows that enforcement
revenues actually increased between fiscal years 2012-2013, 2013-2014,
2015-2016, 2016-2017, and 2017-2018, despite actual enforcement spending
decreasing between each of these periods.
“Similarly, between fiscal years 2019-2020,
enforcement revenues declined by $6.4 billion despite actual enforcement
spending increasing by $317 million.
“Suffice to say, we need to better understand the
facts at play here, particularly before we rush to adopt multi-billion dollar
funding increases.
“And as we all know, revenue comes from the economy,
and revenue collected is far more sensitive to the state of the economy than it
is to the size of the IRS budget or scope of its enforcement.
“When the economy grows, revenues rise; and when the
economy shrinks or grows sluggishly, revenues fall or grow slowly.
“The Administration’s budget proposes several new
reporting, compliance and enforcement regimes, including a proposal to require
near-universal disclosure to the IRS of gross inflows and outflows for both
traditional and non-traditional financial accounts for businesses and for
individuals, as well as for third-party settlement entities.
“I have long been critical of big data collection
activities, and oppose turning banks and brokers into government tax collectors. I also have strong concerns about the proposed
IRS big data requirements.
“According to the budget request, ‘This requirement
would apply to all business and personal accounts from financial institutions,
including bank loans and investment accounts, with the exception of accounts
below a low de minimis gross flow threshold of $600 or fair market value of
$600.’
“Commissioner Rettig, you may recall that expanded
1099 information reporting was enacted in the Affordable Care Act to include
any payment of over $600, and the American people soundly rejected that
provision, leading to its rapid repeal a year later.
“Absent bipartisanship in developing enhanced
compliance and enforcement activities, and public acceptance of their
legitimacy, the Administration’s proposals will not be durable.
“The key issue for the IRS, and for those of us who
oversee it, is to strike the appropriate balance between rigorous enforcement
of the tax laws and heavy-handed, stifling intrusiveness.
“I am concerned about the implications of many of
the President’s budget proposals, including requiring additional, and highly
burdensome, information reporting when some existing reporting is duplicative,
and much is still not being utilized to the fullest extent.
“Proposals to increase compliance and enforcement
can have merit, but there is risk of turning the IRS, and perhaps even private
financial institutions, into feared gatherers of information that is not
necessary for tax administration.
“Also, in regard to compliance, I would be remiss if
I did not indicate my continued disappointment in the lack of responsiveness of
the IRS and Treasury to my inquiries.
“You last appeared before this Committee on April
13, and I have not yet received responses from you to questions that I asked
for the record.
“I also sent you a letter on May 10 with a series of
questions about the speculative and questionable tax gap projections that you
have recently put forward.
“I only received a partial response to my questions
late yesterday afternoon.
“It is somewhat surprising for the Administration to
request outsized and mandatory funding for the IRS, while at the same time not
complying with basic transparency and accountability responsibilities.
“Commissioner Rettig, I look forward to your
testimony, and thank you for appearing today.
“Thank you, Mr. Chairman.”