IRS Commissioner John Koskinen told lawmakers on Wednesday that implementing a flat tax would be simpler than the current tax system and would save the agency a lot of money.
At a hearing of the House Small Business Committee, Koskinen urged lawmakers to approve President Obama’s 2017 budget for the IRS, which increases funding for the agency.
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"The IRS’s funding was cut significantly for the five years from 2011 to 2015, and those reductions have taken a toll on both taxpayer service and enforcement programs," the commissioner said. "I continue to urge Congress to approve the president’s fiscal year 2017 budget for the IRS, which requests a base increase of $530 million over the fiscal year 2016 enacted level."
Rep. Blaine Luetkemeyer (R., Mo.) asked Koskinen whether a flat tax policy would save the agency money.
"There’s a lot of discussion with regards to the flat tax," Luetkemeyer said. "I realize that is a policy decision, but from the standpoint of the IRS being able to implement a flat tax, how much would it save you from people being hired and the money being expended because of the simplification of that?"
"Would you estimate that would help your budget problem here that we keep addressing?" the congressman asked.
"I don’t think I have a number for you but clearly if you had a two-page form or a one-page form where you got rid of all the deductions and everything else and people just paid in effect either a flat tax or a graduated flat tax it would be simpler for taxpayers and it would be much simpler for us," Koskinen said. "We would have still, somebody has to make sure that the numbers are right and we have to follow up with people, we have to answer questions, but there’d be far fewer questions."
Luetkemeyer asked Koskinen for more specifics about how much of the IRS’ current budget of $11.2 billion could be saved if a flat tax were implemented.
"I can’t give you a guess, but it would be a lot," Koskinen said. "It’d clearly be a sea change, a difference in the way the place operates."
Rep. Steve Chabot (R., Ohio), the committee chair, called for the tax code to be simplified.
"Whether we are here in our hearing room or when we visit small businesses at home, we hear from folks who tell us repeatedly that the tax code is too complex," Chabot said. "People want to obey the law. However, the tax code gets more and more complicated every year, and it makes it harder and harder for small companies to get it right and to take full advantage of provisions designed to help them."
"The complexity of our tax laws steals valuable resources—both time and money—from these businesses," Chabot said. "It hinders their ability to grow, succeed, and create the jobs we need."