Good morning. I would like to welcome everyone to today’s hearing on the Internal Revenue Service and the 2011 Tax Return Filing Season.
Today’s conversation about the IRS should begin with a topic too often ignored: the taxpayer. The National Taxpayer Advocate’s recent report to Congress provided some alarming facts on what the federal tax code has become, and how it affects the average taxpayer.
Every year, taxpayers face a tax code of growing complexity. For instance, there have been nearly 5,000 changes to the tax code in the past ten years. Between the period of 1975 and 2005, the code tripled in size. As a result of the growing length and complexity of the tax code, individual taxpayers and businesses spend an estimated 6.1 billion hours and $163 billion every single year simply complying with tax-filing requirements. The cost of compliance for your average individual taxpayer was over $250 in 2007.
As we meet today, we are in the middle of the 2011 tax return filing season and millions of individuals and businesses are working to meet their annual tax return filing obligations. As of March 18, IRS had processed over 73 million individual tax returns and issued nearly 65 million refunds totaling $193 billion. With two and a half weeks to go until the April 18 filing deadline, the Subcommittee looks forward to hearing more about the ongoing tax return season and any problems the agency and tax return filers might be encountering. The Subcommittee would also like to learn more about efforts the IRS has undertaken to improve the efficient processing of returns and refunds, including its e-filing modernization program.
Charged with administering this growing tax code, the IRS must simultaneously respect the rights of taxpayers, provide assistance to the millions of taxpayers who have questions about their taxes, and go after those who seek to cheat the tax system.
And the agency has to do this against a backdrop of ever increasing responsibilities to administer social policy programs. The IRS’s dual mission of both revenue collector and social policy program administrator diverts IRS resources from its core mission and can diminish taxpayer service. Among the biggest contributors to this problem is the new health care law, which gives IRS a host of new responsibilities, including the indoor tanning tax, new taxes and fees on employers and individuals, and a complex small business tax credit.
For FY 2012, the IRS has requested nearly $6 billion dollars, an increase of more than 8 percent from the FY 2010 appropriation. Included in this $6 billion is a request for nearly half a billion dollars, and over 1,200 new employees, to implement the health care law’s provisions. And the costs of the health care law do not end there. IRS’s implementation of the health care law is estimated to cost between $5 and $10 billion over the next ten years. So in addition to the current tax return filing season and the IRS budget request, I hope we can take this opportunity to discuss this dual mission and whether it hampers IRS’s core revenue collection responsibilities.
With that, I would like to welcome Commissioner Douglas Shulman here today, and I look forward to a fruitful discussion of his agency, its mission, and the ongoing tax return filing season.
I am now pleased to yield to our Ranking Member, Mr. Lewis.