For taxpayers needing IRS help, this year’s filing season could be a nightmare. The Washington Post today reports on the long lines at IRS offices. The newspaper suggests that five years of Republican budget cuts are to blame, even though Democrats control the White House and, until recently, the Senate. But, whoever is at fault, the IRS commissioner is correct that his agency’s service is “abysmal.”
Let’s take a closer look at those alleged budget cuts. Using data from the OMB budget database, I split total IRS outlays into two activities: administration and handouts. Administration includes tax return processing, taxpayer help, enforcement, and other bureaucratic functions. Handouts are mainly refundable tax credits, particularly the earned income tax credit, child credit, and Obamacare exchange subsidies, which began in 2014.
The chart shows that the IRS budget for handouts has skyrocketed (red line). The IRS has become a huge welfare agency. Handouts quadrupled from $30 billion in 2000 to an estimated $121 billion in 2015. Handouts have spiked the past two years because of Obamacare exchange subsidies of $13 billion in 2014 and an estimated $29 billion in 2015. (Data for 2015 are the president’s estimates).
How about IRS administration costs? They have been relatively flat (blue line). They grew from $8.4 billion in 2000 to a peak of $12.3 billion in 2011, and then they dipped to an estimated $11.3 billion in 2015.