President Trump wants the IRS to “combat identity theft, prevent fraud, and reduce the deficit through the effective enforcement and administration of tax laws,” according the selected budget outline he released today. He wants the agency to do this with about $239 million less than this year’s level of $11.2 billion—a reduction of about 2 percent from a budget that Congress has been cutting for years.

The response among agency supporters is relief, as in, “it could have been worse.” Over the past month, some news stories suggested the White House wanted to cut the agency’s budget by 14 percent. But realistically, the IRS can’t be expected to do more with less and less funding.

Interestingly, as today’s budget summary acknowledges, the IRS can reduce the deficit through effective enforcement and administration. According to some estimates, the agency collects $4 for every additional dollar it spends.

Treasury Secretary Steven Mnuchin, a Goldman Sachs banker in a prior life, seems to get the idea of return on investment: Unlike other federal agencies, the IRS generates far more revenue than it spends. You might think of it as an accounts receivable department of a business. At his confirmation hearing in January, Mnuchin told the Senate Finance Committee, “"I can assure you that the president-elect understands the concept of when we add people, we make money. He’ll get that completely. That's a very quick conversation with Donald Trump."

Or not. Mnuchin may have succeeded in tempering proposed cuts, but he did not eliminate them. And given the budget proposal, the IRS is not likely to be adding many people.  Since 2010, it has cut staff by 13,000, or 14 percent.    

This is not to say that the IRS has always been a prudent steward of its budget. The agency has suffered through plenty of bad management over the years. Some of its computer systems are outdated and seemingly held together with bubble gum and bailing wire. Yet, many parts of the agency run quite well. The IRS processed more than 240 million tax returns in 2015 and issued 119 million refunds worth more than $400 billion. For most of us, the taxpaying process is remarkably smooth. Our checks clear. We get our refunds. We hardly notice, perhaps because everything works pretty well.

Squeezing Enforcement

Yet, its enforcement activities are constantly squeezed. Audits and criminal investigations are down. So are taxpayer services. Callers wait longer on hold and walk-in sites are open for fewer hours. Experienced staff are retiring or moving to higher-paying private jobs. Taxpayer identity theft is an ever-evolving challenge that threatens to destroy the public’s confidence the process of paying taxes.

Collecting revenue is only part of what Congress asks the IRS to do.  The tax agency also runs a big part of the nation’s safety for the poor through refundable tax credits such as the earned income credit and the child credit. It is partially responsible for managing the Affordable Care Act’s system of credits and penalties for individual health insurance.

The House GOP’s health bill would give the IRS full responsibility for administering insurance subsidies, though the proposal would make some of the IRS’s work somewhat easier than under the ACA. Still, managing the new health system will be a major undertaking.

It should be said that what the Trump Administration released this morning was not really a budget. Even by the standards of any president’s truncated first fiscal blueprint, this one was woefully incomplete. It included no line item at all for the IRS and no detailed description of proposed program changes (only a narrative of two sentences and a budget number).

The document said nothing about spending for programs such as Medicare, Medicaid, and Social Security. And it ignored tax revenues. What do you even call a document that describes only a slice of spending and no revenue?  

The White House promises to have a full budget in May, which could fill in many of the blanks. But no one should expect the IRS to do the increasingly complex job Congress demands with a budget that is nearly one-fifth smaller than it was in 2010.