The IRS is behind the technology curve, and tax complexity compounds these problems. The Inflation Reduction Act greatly adds to these problems.
The Tax Foundation estimates these new taxes will reduce the long-run size of the U.S. economy by 0.2%, eliminate 29,000 jobs and do nothing to tame inflation. Admittedly, these are milder effects than the original Build Back Better Act, but the impact of this bill's complexity could be much greater and more difficult to measure.for various climate and energy industries at a cost of roughly $260 billion over the next decade.
By 2000, Treasury's Inspector General for Tax Administration reported that the IRS, after spending more than $3 billion, was incapable of managing the modernization process and had to turn it over to a private contractor. Since 2000, the IRS has spent more than $4.8 billion, after adjusting for inflation, on technology and"business service" modernization.
But, in the same way that ATMs have reduced staffing at banks and self-checkout has made buying groceries faster, e-filing and technology have made the IRS modestly more efficient. By the IRS's own account, it cost 56 cents to raise $100 in tax revenues in 1991. Today, it takes 35 cents to raise $100.
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