CBO Estimates Taxpayer First Act Would Cut Deficit by $3 Million

Congressional Budget Office
Cost Estimate

April 5, 2019

Bill Summary

H.R. 1957 would change many of the rules that govern the Internal Revenue Service (IRS). The aim would be improving customer service and the process for assisting taxpayers with appeals and to combat identity theft and fraud. Provisions of the bill would restrict certain IRS enforcement activities, modify the agency's organization, change the operations of the U.S. tax court, create an automated system to verify taxpayer information for authorized users, modernize information technology systems in the IRS, and expand the use of electronic information systems within the agency.

Estimated Federal Cost

The estimated budgetary effect of H.R. 1957 is shown in Table 1. The costs of the legislation fall within budget function 800 (general government).

Basis of Estimate

The Congressional Budget Act of 1974, as amended, stipulates that revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) are the official estimates for all tax legislation considered by the Congress. CBO therefore incorporates those estimates into its cost estimates of the effects of legislation.

Virtually all of the estimates for the provisions of H.R. 1957 were provided by JCT.¹

Revenues

On net, JCT estimates, enacting the bill would decrease revenues by $212 million.

Title I. Putting Taxpayers First. Title I would change the management and oversight of the IRS to improve customer service and the process of providing taxpayers with assistance for appeals, restrict certain IRS enforcement activities, and modify the agency's organization. JCT estimates that those provisions would, on net, reduce revenues by $431 million over the 2019-2029 period. CBO has not completed an estimate of the bill's costs that are subject to annual appropriation.

Title II. 21st Century IRS. Title II would combat identity theft and tax refund fraud, create an automated system to verify taxpayer information for authorized users, modernize information technology systems within the IRS, and expand the use of electronic information systems within the IRS. JCT estimates that those provisions would increase revenues by less than $500,000 over the 2019-2029 period.

Title III. Miscellaneous Provisions. Title III would make other changes to the laws governing the IRS, change the organization of the tax court, and increase the penalty for a return filed 60 days after its due date. JCT estimates that this provision would increase revenues by $219 million over the 2019-2029 period.

Direct Spending

Title 1 of H.R. 1957 would prohibit the IRS from using private debt collectors in certain cases, which would reduce direct spending. Currently, the IRS contracts with private companies to collect delinquent federal taxes. Under those contracts, the IRS may allow businesses to retain up to 25 percent of their collections; another 25 percent is available to the IRS to spend on enforcement. CBO and JCT estimate that repealing the private debt collection authority and allowing the current contracts to expire would reduce direct spending by $215 million over the 2019-2029 period, or 50 percent of the estimated reduction in revenues stemming from this provision.

Spending Subject to Appropriation

CBO has not completed an estimate of the bill's costs that are subject to annual appropriation.

Uncertainty

These budgetary estimates are uncertain because they rely on underlying projections and other estimates that are uncertain. Specifically, they are based in part on CBO's economic projections for the next decade under current law, and on estimates changes in taxpayers' behavior in response to changes in tax rules.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown above in Table 1.

Increase in Long-Term Deficits

JCT estimates that enacting H.R. 1957 would not increase on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2030.

Mandates

JCT has reviewed H.R. 1957 and determined that it contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

Estimate Prepared By

Revenues: Staff of the Joint Committee on Taxation and Bayard Meiser

Federal Costs: Matthew Pickford

Mandates: Staff of the Joint Committee on Taxation and Andrew Laughlin

Estimate Reviewed By

Joshua Shakin
Chief, Revenue Estimating Unit

Kim Cawley
Chief, Natural and Physical Resources Cost Estimating Unit

H. Samuel Papenfuss
Deputy Assistant Director for Budget Analysis

John McClelland
Assistant Director for Tax Analysis