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Why the IRS needs our pity

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The top of a form 1040 individual income tax return.

The Internal Revenue Service: As tax season kicks off, we're reminded that no other federal agency is held in higher contempt. But the IRS is struggling with issues beyond its image. According to this story in USA Today, its "budget is too small and its workload too heavy" for the IRS to do its job. And this is while additional cuts to the IRS budget are being considered by Congress:

Driving the IRS workload increase is increasing complexity of federal tax laws and regulations and frequent changes in the tax code — an estimated 579 changes in 2010 alone that had to be explained to taxpayers, entered in IRS computers and added to the agency's auditor training programs.

Ah, the complexity bugaboo. This may increase the IRS workload, but given that tax collections are the government's main source of revenue, this is a problem that urgently needs solving. Especially for people like me, who advocate for a far more complex tax code, managed by more powerful technology.

Politically, it's easy to go after the IRS. The taxman is an inviting target. However, like a lot of Americans, I've had my dealings with IRS and have found the agency to be...well, exceptionally good at what it does. Its "customer service" is superb, if a bit dry and procedural. And the IRS's skill at studying tax returns and providing corrections that both run against and in favor of taxpayers is, in my experience, impeccable.

The agency even has its own office for addressing taxpayer problems, the National Taxpayer Advocate, which originated the concerns about the IRS that USA Today reported on. The Advocate argues that taxpayers are at risk if the IRS can't get enough money to properly do its job. But it also holds the IRS to accounts if it oversteps it bounds, as it evidently did recently in asking wealthy taxpayers to disclose offshore holdings.

So how much does the IRS need to stay in business? Roughly $12.6 billion in 2011. You could buy two Nimitz Class aircraft carriers for less than that, so it's not an insignificant chunk of change. However, the IRS is perhaps the busiest bureaucracy in the free world. It collects revenue from individuals, businesses, and other sources for what is by far the world's largest economy, at $14.5 trillion. In 2007 alone, the agency processed more than 173 million tax returns of all types. What the agency does is monumental. It literally keeps the country going. Look no farther for the true engine of democracy.

Those billions enable the IRS to go after scofflaws and dodgers, like Lindsay Lohan, who reportedly owes the government close to $94,000.

That said, reform is necessary — it it shouldn't come in the form of a radically simplified tax code, as some presidential candidates (both those who are still in it and those who have dropped out) have suggested. The IRS needs to become a 21st-century operation, equipped with the expertise and technology to manage a tax code that must by its nature be complex, but that doesn't currently function with anything near the efficiency of, say, the New York Stock Exchange.

More funding for the IRS? I'm not going to make any friends by arguing for this, but that what the taxpayer needs: for Congress to throw money at the money-collectors.

Follow Matthew DeBord and the DeBord Report on Twitter.

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