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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 g

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.

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.