ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, August 9, 1996 TAG: 9608090048
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: LARRY WILLIAMS KNIGHT-RIDDER/TRIBUNE
NOTE: Above
AN ENFORCER OF SOMETHING as unpopular as tax collection is bound to develop enemies - especially if it works hard at doing its job. The agency becomes an easy target, whether its techniques are justified or not.
First, a special effort to collect billions in delinquent taxes was shut down. Then the IRS said it would have to lay off 5,000 people because of congressional budget cuts. And now Bob Dole says he might do away with the agency altogether.
Why should an organization that returns $4 to the U.S. Treasury for every taxpayer dollar invested make such an attractive target? The answers are both obvious and obscure.
For starters, nobody likes to pay taxes and everyone loves to hate the Internal Revenue Service.
Since the late 1940s, when pollsters began asking the question scientifically, a majority of Americans have been saying their federal income taxes are too high.
When the public was asked last year about the power of American institutions, 63 percent said the IRS had too much, according to a Gallup survey.
``People forget that the IRS simply enforces the laws and regulations written by the tax-writing committees in Congress,'' Calvin Mitchell, a Treasury Department spokesman, said Wednesday.
For all the complaints, even critics agree it usually does a reasonably good job under difficult circumstances.
Not long ago, the IRS offered deficit hawks in Congress a sweet deal: It promised to raise an extra $9.2billion in delinquent taxes if lawmakers would invest $2billion to help auditors do the job.
Congress said yes; in fiscal 1995, as the first new staff members were being hired and trained, a $400 million budget investment yielded $803 million in added tax revenue. But the agency was forced to abandon the effort when congressional budget cutters slashed the extra money from the IRS budget.
It's a measure of how unpopular the agency can be.
``The problem is that the tax collector has had more power to interfere in our daily lives than ever before,'' explained Peter Sepp of the National Taxpayers Union, a group that advocates limiting government's taxing power.
Since the 1970s, Sepp said, the IRS has gained access to a larger volume of information, including data from state and local government databases and from financial institutions.
``Virtually any form of income is now a fair target for the IRS to get information reported literally at its source,'' he said.
Reformers also have been angered recently by ``lifestyle audits,'' where IRS agents asked detailed questions about people's personal lives. The agents aren't necessarily claiming that taxes are owed. The basic idea is to determine whether someone's reported income meshes with how they live.
Or, in other words, why is that Mercedes in the driveway?
Republicans in Congress recently warned the IRS to stop using the lifestyle approach. The agency said it would continue using the technique, but would be more careful in selecting its targets.
Widespread belief that the IRS has been too heavy-handed in its enforcement efforts led Congress to pass, and President Clinton to sign, a Taxpayer Bill of Rights this year. The law creates a taxpayer advocate within the agency with wide powers, including the ability to order the issue of refund checks.
Also this year, Congress established a Commission on Restructuring the IRS to hold hearings on the agency's practices and problems and make recommendations to Congress by next June.
Many tax reformers want to give more power to individuals by simplifying the tax code and by shifting the burden of proof in tax cases to the IRS.
Some want to go further and abolish the IRS - eliminating most of the agency's 106,000-member staff and replacing it with a small accounting and auditing agency.
This could be done, advocates including many Republican politicians say, by replacing the present complex tax code with a simple flat tax or a value-added tax.
But all of the arguments about IRS inefficiencies and the need for reform miss a larger point about the U.S. tax-collection system and the tax-collection agency, said Deputy Treasury Secretary Lawrence Summers.
Summers agreed that the IRS needs to do a better job managing its computers by tapping private sector expertise. And he agreed the agency still must work to make itself more taxpayer-friendly.
But Summers, whose department oversees the IRS, says cutting its staff and budget would encourage those who abuse the tax system while discouraging the large majority of ordinary Americans who pay all their taxes on time.
``Bashing the IRS without offering constructive alternatives is going to end up costing American taxpayers money,'' Summers said.
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Ohio Sen. John Glenn, the top Democrat on the Senate's Government Affairs Committee, which oversees the IRS, agreed.
``Mistakes have been made,'' Glenn said. But IRS workers are the people ``who raise money for defense, the interstate highway system and other services every American values. They deserve a lot of credit. We should be working with them to improve the system.''
LENGTH: Medium: 97 linesby CNB