As honest Utahns and others across the country collect their W2s, 1099s and other paperwork for the 2017 tax year, we should take a few moments to recognize the efforts of retired and retiring Utah legislators to open the door to hacking, confusion and tax fraud by their actions in the U.S. Congress.
Although Jason Chaffetz retired from the Congress in June 2017, he did more than his share to undermine the IRS from his former post as chairman of the House Oversight committee. The chairman has the ability to direct the oversight efforts to areas of particular importance, and prior chairmen attempted to help address longstanding IRS concerns such as outdated computer systems as well as more recent challenges such hackers gaining access to individual refunds.
Rather than assist in addressing these and other difficult challenges, Chaffetz created a feud with IRS Commissioner John Koskinen and held numerous hearings on events that occurred before his tenure, and then initiated efforts to fire Koskinen and take away his pension. Koskinen managed to survive the attacks as few other legislators supported Chaffetz’ crusade, but it was a massive distraction for Koskinen’s ability to address the myriad challenges of the IRS.
Sen. Orrin Hatch also played a key role in creating confusion in the new tax laws from his role as chairman of the powerful Finance Committee, the tax writing committee in the Senate. As was documented by the media coverage, the tax bill was written almost entirely in secret and major changes were being made even on the day of the Senate vote on the bill.
Given this combination of complexity and secrecy, it is not at all surprising that confusion erupted immediately after the final bill was revealed. The first snafu related to taxpayer efforts to pre-pay 2018 property taxes before the cap on state and local tax deductions began on Jan. 1. While the new bill included language preventing the prepayment of state and local income taxes, it failed to anticipate taxpayer efforts to prepay property taxes, so taxpayers, accountants and jurisdictions all over the country spent the last days of 2017 scrambling to determine if this prepayment will be allowed.
Many more questions are likely in the coming years as the IRS faces the monumental task of translating the 500-plus page legislation into forms, instructions and guidelines for individual and corporate taxpayers even while ensuring that 2017 taxes are paid. However, in news that is surely welcomed by tax frauds, Chairmen Chaffetz and Hatch and others in Congress consistently cut the IRS budget so that it is now at the same level as it was 10 years ago.
The result is that middle-class wage earners will continue to pay virtually all the taxes they owe while wealthy taxpayers and businesses will find ways to profit from the complexity against an overburdened IRS. In contrast, following the last tax reform of this magnitude, the Reagan administration recognized the implementation challenges and worked with the Congress to increase IRS staff to implement the changes.
Chairman Hatch also enabled fraud of a different type in the rush to tax reform in that he failed to ensure that the 10-year revenue estimates had any basis in reality. The most obvious evidence for this is that Hatch never demanded the Office of Tax Analysis study often promised (“100 people working around the clock”) by Treasury Secretary Steven Mnuchin. Those promises eventually resulted in a one-page unsigned memo assuming farfetched economic growth rates and revenue. As a result, it will not be surprising when revenue from the new tax plan falls far short of those projections and that substantial cuts are required across federal programs.
The IRS is an agency Americans love to hate, but revenue collection pays the bills, including the salaries of the legislators in Washington. Unfortunately, the legacy of Chaffetz and Hatch is hardly one where they used their time to improve governance through their powerful committee posts. Rather, their last actions saddled an already overburdened IRS with vast new challenges of implementing the new tax rules. Honest Utahns and other Americans will pay the price in terms of poorer customer service and further cuts to federal programs, while those out to take advantage of the confusion through hacking and tax fraud will benefit from the gutting of an essential part of the American government.
Loren Yager, Park City, formerly served as the chief economist of the Government Accountability Office, the investigative arm of Congress.