Clinton proposes boost in IRS budget to allow hiring of more auditors

Search for tax cheats as important as good service, top official says


Warning that continuing cuts at the Internal Revenue Service threaten the nation's tax system, the Clinton administration is proposing more money to find cheaters and make them pay up. And the agency's top official has begun emphasizing that catching cheaters is as important as helping honest taxpayers.

The administration is seeking a 9 percent increase in the agency's budget, the largest increase, adjusted for inflation, in 13 years. That would allow the IRS, whose auditing staff is down one-fourth since 1995, to raise the number of auditors for the first time in six years.

Republicans in Congress who have criticized the IRS said they were open to the idea that more money might be needed.

Even before the request for an increased budget is taken up by Congress, IRS Commissioner Charles O. Rossotti is moving to ensure that the agency does a better job of collecting taxes owed by companies and individuals, he said in an interview last week. For example, he has summoned all 665 managers in the collections department to a three-day meeting in Chicago next month to insist that they act when taxpayers do not pay.

It is the first such meeting of collection managers in the agency's history, said Jody Patterson, an IRS spokeswoman. At the meeting, Rossotti will drive home the message that collection managers cannot allow delinquent taxpayers, especially those who flout the law, to get away without paying.

"We need to stanch the decline in collection activity," Rossotti said in an interview.

If Clinton's budget request is approved, part of it would pay for 633 more auditors, a 5 percent increase. They would hunt for cheating by people with incomes over $100,000, especially business owners, professionals and investors in partnerships.

In the past three years, audit rates among such taxpayers have fallen by two-thirds, to about one in 131 returns.

The IRS said it would also focus on illegitimate business tax shelters that make profits invisible to the IRS. These shelters are growing so fast, IRS officials say, that despite soaring profits, the taxes paid by large companies have begun to decline. These officials say that less than 70 cents of each dollar of profit reported to shareholders in 1998 was reported by companies as taxable, down from 91 cents in 1991.

The administration also wants to hire more people to answer telephone calls to the agency, allowing about 300 auditors detailed to this customer service work to resume examining questionable returns.

Treasury Secretary Lawrence Summers said that "we need to begin increasing capacity" to enforce the tax laws "to maintain people's confidence that this is a tax system that works."

He said enforcement must go hand in hand with improving service to cooperative taxpayers. "Better customer service and greater collection volumes go together," he said.

Pub Date: 2/13/00

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