An Administration proposal to strengthen tax compliance efforts would pay for itself several times over, according to a new analysis by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). It’s just one of several “program integrity” initiatives in the President’s 2012 budget to fight waste, fraud, and abuse, and they deserve Congress’s support.
CBO and JCT estimate that spending $13 billion more over the next decade on Internal Revenue Service (IRS) enforcement could bring in an extra $42 billion in revenues. They estimate that the other Administration proposals — which would boost administrative funding to make sure that people receiving disability benefits from Social Security or Supplemental Security Income (SSI) still qualify for them, crack down on fraud in Medicare and Medicaid, and weed out people who are improperly receiving unemployment benefits — would also more than pay for themselves over the next decade.
These proposals sound like an easy call for Congress, but they aren’t. For one thing, extra administrative funding doesn’t generate an immediate return; instead, the savings occur over time. The Social Security Administration, for example, generally states that every $1 spent on disability reviews will eventually generate $10 in benefit savings — but the key word is “eventually.”
Also, the costs and savings appear in different budget categories. In budget jargon, the extra administrative funds are discretionary; but the resulting savings materialize as higher revenues and lower mandatory spending. As CBO explains, budget scorekeeping rules don’t allow the congressional appropriators that would need to approve the extra administrative funds to count the expected tax and mandatory savings as an offset. So, even though funding these activities saves the federal government money in the long run, in the short run it uses up money the committees then can’t spend elsewhere.
That’s why, since 1990, the President’s budgets, congressional budget resolutions, and budget process rules have created procedures to set aside funds for these unglamorous but necessary activities. Erskine Bowles and Alan Simpson, co-chairs of the President’s Fiscal Commission, urged Congress to maintain this practice. But the budget resolution that the House passed this year abandoned this longstanding approach — even though that likely means deficits and debt will eventually be higher.
Ensuring that people do not inadvertently or deliberately abuse the tax law or benefit programs doesn’t just save money; it also makes the programs fairer to the vast majority of recipients, providers, and taxpayers, who do play by the rules. Congress should fund the President’s proposals.