Because of budget cuts, the IRS now has fewer employees than it has in the past. This decline in labor force further reduces their already declining ability to police businesses on the accuracy of their financial statements. To respond to this unfortunate circumstance for the IRS, President Obama has proposed a 10 percent increase in their budget for next year, which is something that the IRS Commissioner, John Koskinen, disagrees with "because it exceeds spending caps already set by Congress." This increase in government spending to fund the IRS would increase output and consumer income. If the government continues to spend more, not just on the IRS budget but spend more in general, in the long run this will lead to a rightward shift in the IS curve on the IS-LM model. To respond, the government may hold M constant, r constant, or Y constant which would all have different effects on the economy.
http://abcnews.go.com/Politics/wireStory/chances-audited-irs-lowest-years-23307720
http://abcnews.go.com/Politics/wireStory/chances-audited-irs-lowest-years-23307720
I find it very interesting that President Obama is suggesting a 10 percent increase in the budget for the IRS as opposed to suggesting it for other branches of the government. I agree with John Koskinen that this should not occur because it does exceed spending caps and the government really needs to focus on decreasing all of their spending so we can shrink the deficit.
ReplyDeleteThe government's choice to increase the budget by 10 percent is a strange choice seeing that it puts the US over its spending limit. This means the government is decreasing its spending in other areas, which could possibly hurt the public. However, if people are cheating their taxes, it is hard for the government to supplement their spending. I can't say I agree with the government's choice but it may be necessary.
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