Writer Alvin Goldberg was entirely correct in his Jan. 20 letter asserting that the planned addition of 87,000 IRS agents will be a net benefit to the federal budget rather than an expense that reflects solely the cost of their salaries and benefits. It is historically and demonstrably true that the skilled CPAs who examine taxpayer returns are able to discern errors, whether or not deliberate, that ultimately result in increased taxpayer obligations that, when corrected, add to federal revenues—and hence reduce federal budget deficits, against which Republican officials and candidates for office commonly protest. However, the merit of Mr. Goldberg’s point should be extended beyond the relatively short-term dollars-and–cents results obtained from a current-year audit.
Contrary to widespread assumptions, the essential job of the IRS agents is not to browbeat taxpayers for the financial equivalent of the Shakespearean pound of flesh. It is, rather, to do their best to see that all taxpayers, whether individuals, households, or businesses, abide by the tax code in accurately reporting their incomes, expenses, and net taxable income and to spot errors and/or omissions, whether deliberate or inadvertently.
Those agents do not determine the federal government’s revenues or expenses, or how the U.S. Treasury copes with the resultant budget deficits. Their objective, as trained CPAs, is to ensure compliance with the tax laws as written. and, secondarily, to make corrections of errors which, on some relatively rare occasions, result in overpayments and refunds but more often require additional taxes and sometimes penalties for deliberate misstatements of income and/or deductible expenses.
But the primary contribution that the IRS makes to the American system of governance is, in my opinion, the very fact of its existence. The awareness among taxpayers, and at least as significantly among accountants, that the IRS can conduct audits of returns is a fairly potent motivation to abide by the regulations in the tax code. Indeed, it’s fairly safe to say that if there were no IRS, there would be as good as zero compliance with a “voluntary” tax system not subject to enforcement.
It may be possible to design a system of taxation that doesn’t depend on a percentage of reported incomes to obtain the revenues needed to pay for the government’s functions– e.g., maintaining the military, operating the federal court system, protection and care of our national parks, etc. But until and unless such a better means of obtaining the funds necessary to pay for those essential government services, we are stuck with the burden of filing our tax returns annually and of doing our best to avoid errors—again, whether deliberate or inadvertent—that might lead an IRS auditor to question them and, as a result, to require sending the U.S. Treasury another check for payment due.
Robert I. Adler