A Bad Byte Out of IRS

July 1, 1994

IT isn't often that one feels moved to rise to the defense of the Internal Revenue Service. After all, these are the folks who give us an annual rite of spring that can generate more perspiration than July in Miami: filing income-tax returns.

Yet an item crossed our desk recently that, pardon us, taxed credulity: The US House of Representatives recently halved the budget for upgrading the IRS computer system.

Our sympathy has less to do with an attraction to the latest bells and whistles than with simple arithmetic. The federal government is struggling to reduce its budget deficit, which the Clinton administration estimates at about $225 billion for this fiscal year. Meanwhile, the IRS estimates that out there somewhere, $100 billion in unpaid individual and corporate income taxes are floating around. The logic isn't hard to follow: Collect more of that money, and the deficit has a better chance of falling a bit faster.

At the moment, the IRS is saddled with technology that in some cases dates back to the 1960s.

The advantages to newer computers: They would allow speedier comparisons of larger numbers of returns to income forms from employers. And newer technology also might allow for speedier recognition of anomalies that trigger audits.

As things stand now, the uncollected taxes are an unadvertised tax break, mostly for wealthy filers who submit complex returns.

The $500 million deduction from the IRS's modernization plan stems in large part from the law of unintended consequences. The cut, while decried by many House members, nevertheless was approved because of spending caps enshrined in past budgets.

Restoring the money at this point may be moot. But the incident should serve as an object lesson in why legislation that takes accountability out of the budget process is suspect. A simple future solution to the problem exists: Change the law, and collect more of the taxes already due.

Failing to act on such an egregious mistake makes lawmakers look as though they lack that most basic of computing tools - common sense. It would be sad if out of this episode came the footnote: For the want of a byte, the budget was lost.