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The IRS’s Stark Warning: Boost IRS funding, Or Voluntary Tax Compliance Could Erode In The U.S.

The IRS’s stark warning: Boost IRS funding, or voluntary tax compliance could erode in the U.S.

IRS Commissioner John Koskinen warned Wednesday that holding his agency’s budget flat for the next several years could make IRS tax enforcement so weak that it threatens Americans’ voluntary tax compliance, on which the government relies heavily for most of its funding.

“My concern is at some point, the voluntary tax compliance system begins to erode,” Koskinen said at the Brookings Institution Wednesday. “And as I’ve said, that’s not an on-off switch.”

MIAMI, FL - JULY 31: Internal Revenue Service Commissioner John Koskinen speaks to the media during a visit to the Miami office at the Claude Pepper Federal Building on July 31, 2014 in Miami, Florida. Mr. Koskinen is touring several IRS offices since he became head of the nation's tax agency. Joe Raedle/Getty Images

Joe Raedle/Getty Images

“You can’t one day and say, ‘wow, I didn’t know that was going to happen, here’s some more money,’ ” he said.

An erosion of voluntary compliance could be a big blow to federal revenues. Koskinen noted that the IRS generates about $50 to $60 billion each year through its own direct enforcement action, but that’s a tiny amount next to the roughly $3 trillion in total revenues the government took in last year.

Koskinen said that for now, he’s seen no erosion of voluntary compliance. He noted that with a healthy economy, revenues surged to a record high, but he admitted that’s not necessarily any sign of people’s attitudes about voluntarily complying with the tax code.

He said the IRS would issue an updated report next year about the state of voluntary compliance with the tax code.

IRS funding has dropped over the last few years, largely because of how Congress has reacted to several sandals. Those include the targeting of conservative groups and wasting hundreds of thousands of dollars on lavish conferences. More

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