87,000 New IRS Agents Aren’t Going to Solve America’s Real Problems, but Innovation Will
The IRS is about to hire as many as 87,000 new agents thanks to $80 billion in funding from the Inflation Reduction Act. It’s an attempt to correct years of underfunding at the agency.
“There are a bunch of problems. They have about 8 million unprocessed 2021 returns and only answered 11% of calls in 2021,” says Bill Smith, national director of tax technical services at CBIZ MHM’s National Tax Office in Washington, D.C. “There’s been a 17% reduction in the [IRS] workforce since 2010.”
Notably, more than half of this funding is going toward enforcement “to close the estimated $600 billion ‘tax gap,’ the difference between what Americans owe and what they actually pay.” But is cutting loose an army of new IRS agents to collect on these tax scofflaws really the answer here?
This problem reminds me of a project I worked on with Ken Morris in Monterrey, Colombia around 2013. The regional power authority, Empresas Públicas de Medellín (EPM), had several interrelated problems: Few local residents were actually paying their electric bills, many of them were instead resorting to stealing power, and as many as 4-5 people were dying every month due to these shoddy, stolen DIY electric lines. By the numbers, the agency had about a 5% theft rate of power, a 25% disconnect rate every month for those who didn’t pay, and too many deaths as a result.
It didn’t take long for us to figure out what the problem was.
In order to pay their electric bills, residents had to take a bus about an hour into town to go to the office and pay their bill in person. Every month. For many people, who were also working full-time and committed to responsibilities closer to home, this just wasn’t feasible on a regular basis, so they fell behind on their bills. When their power was inevitably shut off, that left them with the only viable alternative: stealing power.
So, the power authority switched to prepaid power meters to simplify the process, at a cost of less than $50 each. Now, residents just go to their local bodega and buy a scratch off card for the amount of power they need. They scratch off to reveal the code, plug it into their meter at home, and their power flows until it needs to be refilled again.
Overnight, the payment lapses, power stealing, and deaths stopped. It all just went away when a better process came along.
The lesson? The real reason that people were dying and stealing is that the payment process was so complex that they couldn’t make it work. It was just easier to steal power than take hours out of the day to go and try to pay the bills.
Maybe the IRS has the same problem. The tax system is complex, overwhelming and effectively a black box for many Americans. Maybe that confusion is part of the reason that some people aren’t paying. (I know, there are many other reasons that people don’t pay their taxes, but access is certainly one of them.) In that case, the agency might better spend those billions not on hiring all 87,000 new agents but instead innovating new ways to make it easier to pay your taxes.
This isn’t just a tax problem.
We currently have a $1.9 trillion health problem in the United States related to the foods we eat. Diabetes, heart disease, obesity and more are all diet-related conditions that are costing the U.S. economy trillions. We spend about $1.7 trillion a year in the United States on food, and we spend another $1.2 trillion annually on health care related to chronic conditions that can be traced back to nutrition. In fact, the U.S.’s top five diet-related chronic diseases cost the U.S. economy $1 trillion each year, in terms of the estimated cost of direct medical costs and the indirect impact of productivity losses due to illness and premature death. The more that we understand about disease and the better that we understand the science of food, the more clearly we see how interconnected they are.
And, like the EPM power bills that make it cheaper and easier to steal than actually pay (even though you might die), we’re living in a world right now where it’s cheaper and easier to drive through at McDonald’s than actually find something healthier and more nutritious (even though it might impact your long-term health).
It’s all cheaper on the front end, with enormous costs on the backend.
Over time, unhealthy eating creates later-stage life health issues. You eat too many processed sugars, you’re at risk of developing obesity and diabetes. Spend too many years eating nothing but red meat, your cholesterol and blood pressure will likely suffer. Yes, industrial agriculture brought food to the masses, but with associated costs that are just now becoming clear.
How do we solve this? The answer is innovation. We have to make it cheaper and easier to adopt better food than it is right now. We need a new approach to food that understands that consumers base a significant amount of their purchase decisions on price. We need to make good, healthy options cheaper and more attractive than today’s “bad” foods. When food tastes good, you’re going to eat it. And if it’s less expensive, you’re going to buy it. If more nutritious is less expensive than junk food, then you’re going to eat that as well.
It’s about more than just new food technology. The real solution here is in access. Access to better food, access to cheaper food and access to education around the root causes of these conditions. We need to make it easier for people to access better food, just like the IRS needs to make it easier for people to pay their taxes.