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IRS budget cuts would increase the federal deficit

As Washington, D.C., continues to struggle with reconciling the federal deficit and operating budgets, no agency is immune, including the one charged with bringing in Uncle Sam's money.

But, warned IRS Commissioner Douglas Shulman, budget cuts to his agency would be counterproductive. In fact, the commish told a Senate panel Wednesday, June 8, that cuts to the IRS budget would actually increase the federal deficit.

IRS Commissioner Douglas Shulman testifies before the Senate Appropriations Financial Services and General Government Subcommittee hearing on the budget estimates for FY2012 for the Internal Revenue Service (IRS) on Capitol Hill in Washington, DC, on June 8, 2011. UPI/Roger L. Wollenberg

The White House budget calls for the IRS to receive around $13.3 billion in fiscal 2012. Congress has not set a specific number for the IRS to receive next fiscal year, but a resolution approved earlier this year proposes a $2 billion cut from several agencies. The IRS would take the biggest hit.

Such a cut, Shulman told the Senate Appropriations Committee's Subcommittee on Financial Services and General Government, would adversely affect not only customer service, the IRS' ability to follow through on enforcement efforts.

That, he predicted, "would actually increase the deficit by decreasing revenue."

Right now, said Shulman, the IRS collects around $345 billion every year.

The agency's current budget is $12.1 billion and it is seeking an almost 10 percent increase for the next fiscal year. The additional funds, Shulman told the Senators, would allow the agency to hire 5,000 new agents to help beef up audits.

The IRS estimates that by 2014 it will save the U.S. around $1.3 billion. That's the year, said Shulman, when every dollar spent on enforcement would bring in $6.

Shulman detailed the work his agency does now and new programs planned for the coming tax years in his written testimony to the panel. He specifically noted the additional work the IRS is facing in light of tax-related provisions in the new health care law.

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