April 07,2022

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Wyden Statement at Finance Committee Hearing with IRS Commissioner Rettig

As Prepared for Delivery

This morning the Finance Committee meets to discuss the IRS budget for the year ahead and the filing season that’s winding down later this month.

Around the country are millions and millions of families who are feeling the pressure of rising prices. This year in particular, people are counting on getting their tax refunds to help cover the bills.

I’ll cut right to the heart of the matter for those families whose refunds might be delayed due to IRS backlogs. If you’re frustrated by poor customer service from the IRS, you’ve got years and years of Republican cuts to blame for gutting the agency’s ability to meet your expectations.

For all the talk about running government more like a business, Republicans seem to want to turn government into the kind of dysfunctional business that never has a repeat customer.

They had an opportunity, when they passed their tax law in 2017, to fix the IRS comprehensively, reduce backlogs and improve service. They did not do it. In fact, they added more complexity to the tax code and made the tax system more difficult to manage. This came after Republicans had been squeezing the IRS budget steadily for years. It was clear at the time, Republicans were steering into a train wreck, and you’re seeing the effects today.

The number of revenue agents at the IRS, the people who audit tax returns, is currently a third of what it was a decade ago. The officers who collect unpaid taxes are down by nearly half. The agency has the same number of employees it did in 1970 when the country’s population and economy were a fraction of the size they are today.

As of late March, the IRS was facing a backlog of 12 million tax returns. Service agents are struggling to keep up with phone calls. So far this year they’ve been able to answer only 11 percent of them.

The IRS has recently been on a hiring mission thanks to funding and hiring authority passed by Democrats. The agency is making progress on the backlog and targeting resources at customer service and phone lines. But in the meantime, law abiding taxpayers dealing with the aftereffects of these Republican budget cuts are left with the impression that the government couldn’t manage a two-car parade.

With that said, not everybody is pained by what’s happening at the IRS. Customer service has fallen off, but tax enforcement is in even worse shape, which means these are high times for wealthy tax cheats. The IRS is totally outmanned against tax cheats who use those complexity-driven loopholes to cheat out of paying their fair share. There are fewer revenue agents working today than at any point since World War Two, but the challenge they’re up against is a whole lot bigger.

Some of the murkiest, most loophole-ridden parts of America’s broken tax code deal with partnership income. It is a thicket of super-complicated rules that are supposed to apply to a third of all business income in the United States — a large and growing percentage.

In fiscal year 2020, the IRS examined barely more than one tenth of one percent of partnership tax returns. The tiniest sliver. Meanwhile, new research from U.C. Berkley found that the working poor are 12 times more likely to face an audit.

Look at the big picture. As a result of years of Republican budget cuts, IRS customer service is struggling at best, wealthy tax cheats are getting away with breaking the law, and the burden of tax enforcement has been shifted onto working people who spend every day walking a tightrope.

Democrats in Congress have begun to reinvest in taxpayer service and enforcement to crack down on the cheats and to make tax filing season less of a headache for everybody else. Part of that ongoing process, in my view, must be making it easier for Americans to file their taxes directly online, for free.

Taxpayers are paying huge sums to file their taxes through private companies, and some of those companies use deeply deceptive practices to steer them away from free options they have a legal right to use.

I’ve been a longtime supporter of the right to file directly with the IRS online, as well as a “simple return” system in which your forms show up completed, and all you have to do is check the numbers. The bottom line is that it’s past time for Congress to tell these tax prep companies that they no longer have a free pass to turn rip-offs and deception into profits.

Wrapping up, I want to thank Commissioner Rettig and particularly the frontline staff at IRS for putting in long hours this filing season to get refunds out in a timely way. That job’s been made a lot harder, but the staff are working hard and that effort is much appreciated. I’m looking forward to our discussion with Commissioner Rettig today.