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The most insane part, for the alleged "fiscal conservatives" who push for gutting the IRS, is the crazy ROI on IRS funding. Estimates range $4-$8 revenue per d

The most insane part, for the alleged "fiscal conservatives" who push for gutting the IRS, is the crazy ROI on IRS funding. Estimates range $4-$8 revenue per dollar spent. At that rate of return, basically every company would be frothing at the mouth to invest.

ReaLNero 7y ago
Source for the $4-$8 revenue per dollar estimate? Don't forget that there's a difference between average return, and marginal revenue. More funding should be given if the marginal revenue is larger than the funding. The average revenue takes no part in this decision.
- TAForObvReasons 7y ago
  Thanks for making me look, the numbers are even more extreme in some cases: https://www.finance.senate.gov/ranking-members-news/irs-budget-cut-translates-to-huge-tax-loss https://www.finance.senate.gov/ranking-members-news/irs-budg... > IRS Research Division estimates in the 2003 GAO report, however, placed returns for activities such as tax enforcement at more than ten – and in some cases more than 20 – dollars collected for every dollar spent. Phone calls to follow up on tax debts owed were estimated to return 13 dollars for every dollar spent. Audits by mail returned as much as 11 dollars for every dollar spent. Using the overall rate of a four to one return, this year’s $100 million budget cut translates to a $400 million loss. Imagine 20 dollars per dollar spent, that's the type of unicorn investment that basically every VC hunts for.
  - bobthepanda 7y ago
    I would imagine that tax enforcement would be one of those things with diminishing returns. Obviously we can afford to diminish a 20.0 BCA and still make tons of money, but I wonder what the actual limit of this would be.
    - TAForObvReasons 7y ago
      There are two schools of thought: 1) The fiscal conservatives should argue that as long as revenues increase more than expenses (better than 1:1), we should increase funding to the IRS. After that, the expense outweighs the direct reward. 2) There's a huge moral hazard when we don't enforce tax laws. People become more emboldened to cheat on taxes. Increased funding should also rein in future frauds. So even if you spend $2 to collect $1, if that deters future fraud it is possibly worth more than the $2 spent
      - sokoloff 7y ago
        There’s also a cost to honest taxpayers who are false positive audited that must not be ignored. Having been through it last year for tax year 2015, I and my Enrolled Agent spent close to 75 hours combined for a net result of around $500 increase in 2015 tax owed and a corresponding offset of the same amount in 2016 because I got the timing wrong on a payment that hit Jan 2016 instead of Dec 2015. That likely cost the IRS a comparable, if not greater, amount of hours. Increasing the funding is not beneficial when it results in more audits like mine.
deleted 7y ago
[deleted]
mindslight 7y ago
Taking money by fiat is obviously profitable, so this is not a particularly noteworthy metric. In fact, it stinks of the same myopic overfinancialization that has contributed to the mess over on Wall St. If the IRS wants to increase compliance and reduce their workload, the straightforward way is to stop dancing around this illusion that their system is in any way optional, and start creating straightforward prescriptive systems rather than just issuing a myriad of disparate prohibitions with steep penalties for making a mistake. The current philosophy requires the IRS to do the work to interpret all these privately-defined systems, allows rent-seeking companies to nickle and dime captive middle-class taxpayers, and practically begs wealthy people to hire lawyers to come up with novel interpretations to skirt the intent.

ReaLNero 7y ago

Source for the $4-$8 revenue per dollar estimate? Don't forget that there's a difference between average return, and marginal revenue. More funding should be given if the marginal revenue is larger than the funding. The average revenue takes no part in this decision.

TAForObvReasons 7y ago
Thanks for making me look, the numbers are even more extreme in some cases: https://www.finance.senate.gov/ranking-members-news/irs-budget-cut-translates-to-huge-tax-loss https://www.finance.senate.gov/ranking-members-news/irs-budg... > IRS Research Division estimates in the 2003 GAO report, however, placed returns for activities such as tax enforcement at more than ten – and in some cases more than 20 – dollars collected for every dollar spent. Phone calls to follow up on tax debts owed were estimated to return 13 dollars for every dollar spent. Audits by mail returned as much as 11 dollars for every dollar spent. Using the overall rate of a four to one return, this year’s $100 million budget cut translates to a $400 million loss. Imagine 20 dollars per dollar spent, that's the type of unicorn investment that basically every VC hunts for.
- bobthepanda 7y ago
  I would imagine that tax enforcement would be one of those things with diminishing returns. Obviously we can afford to diminish a 20.0 BCA and still make tons of money, but I wonder what the actual limit of this would be.
  - TAForObvReasons 7y ago
    There are two schools of thought: 1) The fiscal conservatives should argue that as long as revenues increase more than expenses (better than 1:1), we should increase funding to the IRS. After that, the expense outweighs the direct reward. 2) There's a huge moral hazard when we don't enforce tax laws. People become more emboldened to cheat on taxes. Increased funding should also rein in future frauds. So even if you spend $2 to collect $1, if that deters future fraud it is possibly worth more than the $2 spent
    - sokoloff 7y ago
      There’s also a cost to honest taxpayers who are false positive audited that must not be ignored. Having been through it last year for tax year 2015, I and my Enrolled Agent spent close to 75 hours combined for a net result of around $500 increase in 2015 tax owed and a corresponding offset of the same amount in 2016 because I got the timing wrong on a payment that hit Jan 2016 instead of Dec 2015. That likely cost the IRS a comparable, if not greater, amount of hours. Increasing the funding is not beneficial when it results in more audits like mine.

deleted 7y ago

[deleted]

mindslight 7y ago

Taking money by fiat is obviously profitable, so this is not a particularly noteworthy metric. In fact, it stinks of the same myopic overfinancialization that has contributed to the mess over on Wall St. If the IRS wants to increase compliance and reduce their workload, the straightforward way is to stop dancing around this illusion that their system is in any way optional, and start creating straightforward prescriptive systems rather than just issuing a myriad of disparate prohibitions with steep penalties for making a mistake. The current philosophy requires the IRS to do the work to interpret all these privately-defined systems, allows rent-seeking companies to nickle and dime captive middle-class taxpayers, and practically begs wealthy people to hire lawyers to come up with novel interpretations to skirt the intent.