A recent research paper published in the Quarterly Journal of Economics highlights the effectiveness of in-person audits carried out by the IRS. The study found that for every dollar spent on audits, $2.17 comes back via tax collected. However, the effectiveness varied across income distribution, with audits of higher income filers yielding a higher return. Additionally, the paper emphasized the long-term impact of audits on tax behavior, with households audited showing higher tax receipts in the following years.
Despite the clear benefits of effective auditing, the article points out that the efficiency of the IRS has not been a priority for Republicans in the past. The party has historically cut IRS funding, leading to a reduction in audits. With Republicans now in control of the White House, Senate, and House of Representatives, it is unlikely that they will prioritize implementing the findings of the research paper.
However, the core lesson of the paper remains crucial for government effectiveness – adequate funding is essential for agencies to carry out their job effectively. The article emphasizes the need to support enforcement across various government agencies, from the Department of Labor to the EPA. While Republicans may not like this solution, the evidence from the research paper makes it clear that funding is the key to improving government efficiency.
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