More About Robert Greenstein

Robert Greenstein

Greenstein is the founder and President of the Center on Budget and Policy Priorities. You can follow him on Twitter @GreensteinCBPP.

Full bio and recent public appearances | Research archive at CBPP.org


Senate Witness Misrepresents IRS Certification and Training for Tax Preparers

April 10, 2014 at 2:35 pm

Legitimate disagreement in policy debates is part of what democracy is all about.  Gross misrepresentation is not.  And it’s particularly inappropriate when it comes before a congressional committee.

Yet that’s what occurred Tuesday when Dan Alban, a lawyer at a libertarian legal institute who brought the lawsuit that bars the IRS from attempting to rein in incompetent or unscrupulous tax preparers, testified before the Senate Finance Committee.  Alban repeated his falsehoods in a Washington Times column Wednesday morning.

Alban was trying to counter striking IRS data showing very high error rates on tax returns claiming the Earned Income Tax Credit (EITC) that were prepared by preparers who are neither certified (they’re not lawyers, CPAs, enrolled agents, or the like) nor affiliated with a national tax preparation chain.  Such preparers handle 43 percent of all commercially prepared tax returns claiming the EITC.  As the IRS National Taxpayer Advocate Nina Olson has reported, nearly half (49 percent) of the returns they prepared had errors that averaged 33 percent of the amount claimed.

The IRS has sought to require training and competency tests for commercial preparers, but Alban’s lawsuit convinced the courts to cripple the IRS initiative on the grounds that Congress hadn’t given the IRS the authority to do it.  The court ruling thus poses a question for Congress:  should it give the IRS this authority in order to protect the federal Treasury as well as tax filers?  At Tuesday’s hearing and in his Washington Times piece, Alban insisted it should not.

One of his prime arguments he advanced in his testimony is that “… licensing and IRS-mandated training are largely ineffective.  For example, IRS trained-and-certified preparers in the VITA volunteer program were found by the Treasury Inspector General for Tax Administration (TIGTA) to have a 61 percent error rate in 2011.”

But the 61 percent figure is a canard.  The best estimate in 2011 of the error rate for returns prepared at the tax preparation sites in question — Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites, for which IRS trains the volunteers who provide tax preparation assistance — was 13 percent.

How did Alban derive his 61 percent error rate figure?  In 2011, the Treasury Inspector General picked a small number of VITA/TCE sites and tested how they would do with several complex, uncommon, challenging tax scenarios.  As the IRS has explained, they were “uncommon tax scenarios that affect a small fraction of the returns” that these sites handle.  The error rate on those particular uncommon scenarios was 61 percent.

As anyone with just the most basic understanding of taxes or statistics will recognize, a rate of error on uncommon, error-prone scenarios cannot be applied to all tax returns that these sites handle.  Moreover, the Inspector General review was a small one whose results were not statistically valid, as the IRS has also explained.

When the IRS conducted its Quality Statistical Review, a statistically valid review for the entire population of returns that these sites prepare, the accuracy rate was 87 percent in 2011.  A subsequent IRS review of VITA/TCE sites found a 91 percent accuracy rate in 2013.

These data aren’t obscure; they are contained in the TIGTA report itself.

Vigorous debate is essential in our democracy.  Misrepresenting data to Congress and the public is not.

Chairman Ryan’s Obfuscation: Part 2

April 10, 2014 at 2:10 pm

I explained earlier today the hollowness of House Budget Committee Chairman Paul Ryan’s attempt to deny that his budget cuts low-income programs deeply.  Ryan’s defense was that since total federal spending grows under his budget, how can we say it contains cuts, rather than merely slowing the rate of growth?  We disposed of this in my earlier post, but I want to dig deeper here to expose a budget trick Chairman Ryan is playing.

Sure, total federal spending grows under his budget in nominal dollars.  But that’s driven in large part by increases in Social Security and Medicare — whose costs rise with inflation and the aging of the population, among other factors — and interest payments on the debt.  Ryan cites trends for overall federal spending to mask the fact that his budget contains hefty cuts — even in nominal (non-inflation-adjusted) dollars — in key low-income programs like Medicaid and SNAP (formerly food stamps).

In his attempt to deflect our finding that 69 percent of his budget cuts come from programs targeted on Americans of limited means, Ryan says that Medicaid would receive over $3 trillion during the coming decade under his budget and that its costs would grow in all years after 2016.  Here’s what his too-clever-by-half response conceals:

  • Under the Ryan budget, expenditures for Medicaid, the Children’s Health Insurance Program (CHIP), and a few small related programs (i.e., expenditures for “budget function 550”) would fall — not grow — in nominal dollars between 2014 and 2016, from $357 billion to $311 billion.
  • While this figure would grow in nominal dollars after 2016, that would be from this shrunken starting point.
  • And it wouldn’t return to its 2014 level, even in nominal dollars, until 2022 — by which time health care costs will be substantially higher than in 2014, the population will be considerably larger, and the number of poor, elderly people in nursing homes will have risen considerably given the aging of the baby boomers.  That’s partly why, as my earlier post explained, tens of millions of less-fortunate Americans would lose health coverage and become uninsured under the Ryan budget.

A similar pattern marks the Ryan plan for the part of the budget that includes SNAP, Supplemental Security Income (SSI) for poor people who are elderly or have serious disabilities, the Earned Income Tax Credit, and other such programs.  In this part of the budget, as well, nominal spending wouldn’t return to its 2014 level until 2022.

Chairman Ryan has every right to propose severe cuts in any program he chooses.  But he should be straightforward about what he is proposing.

Chairman Ryan’s Response to the Center’s Analysis Doesn’t Hold Water

April 10, 2014 at 10:26 am

House Budget Committee Chairman Paul Ryan took exception to our finding that 69 percent of the non-defense spending cuts in his new budget come from programs for people with low and moderate incomes.  But he makes no attempt to refute our calculations, and his response both defies logic and conflicts with his own budget and even his own words.

For starters, we derived the 69 percent figure from the cuts that Chairman Ryan displays in his budget.  We added up his cuts in mandatory and non-defense discretionary programs, calculated how much of them would apply to low- and moderate-income programs, and derived the 69 percent figure.  Chairman Ryan was explicit that his budget makes substantial cuts in various programs — like SNAP (formerly food stamps), Medicaid, Pell Grants, and health reform’s subsidies to help people afford insurance — that are targeted on people with low or moderate incomes.

Responding to the 69 percent figure, the Chairman shifted direction in a new piece that he inserted this week in the Congressional Record.  He claimed these cuts aren’t really “cuts” at all; instead, they are simply smaller spending increases than would otherwise occur.  “A smaller increase is not a spending cut,” he wrote.

Well, two problems:

First, the Chairman is trying to have it both ways.  At the very start of his “Pathway to Prosperity,” he writes, “The House Republican budget cuts spending by $5.1 trillion over the next ten years.”  Apparently, he wants to brag to congressional budget cutters that his plan cuts spending deeply, while convincing critics of his budget cuts that they aren’t really “cuts” at all.

Second, the latter argument — that a cut isn’t really a “cut” — makes little sense.  For many programs, it costs more to provide the same services for its beneficiaries from year to year, because of inflation.  In addition, the population is aging and, thus, more people qualify for programs for elderly Americans each year.  For these reasons, the cost of providing the same level of benefits and services to people who qualify rises for various programs from year to year in nominal dollars — that is, in dollars not adjusted for inflation, population growth, or the population’s aging.

A budget allocation that doesn’t cover cost increases due to these factors means either that eligible recipients will see their services or benefits cut, or that some people who would otherwise qualify for those services or benefits are turned away.

For instance, Chairman Ryan claims in the piece he inserted in the Congressional Record that his budget spends more than $3 trillion in Medicaid over the next decade, with spending rising every year starting after 2016.  But his budget would repeal the Medicaid expansions that 26 states and the District of Columbia have adopted under the Affordable Care Act, thereby returning millions of low-income people to the ranks of the uninsured.  And his budget cuts Medicaid by $732 billion on top of that, relative to what the program would otherwise cost, which translates into a 26 percent cut by 2024.  An Urban Institute analysis of a similar cut in a past Ryan budget found that it would cause 14 to 20 million additional people to lose coverage.  Just ask the millions who’d lose Medicaid and end up uninsured whether they consider that a cut.

What’s true in government is true in life.  If a worker gets a 1 percent wage increase in a year in which inflation is 5 percent, that worker has suffered a 4 percent cut in living standards.  He or she has 4 percent less to cover the costs of food, housing, health care, and other necessities. Ask that person whether he or she has suffered a cut in living standards.

We stand by our analysis.

Camp Plan Hits Many Working Poor Families Hard, Taking $2,000 From Minimum Wage Mother

February 27, 2014 at 8:13 am

House Ways and Means Chairman Dave Camp’s tax plan would produce winners and losers — and among the big losers are many families in which parents are struggling to raise their children on poverty wages.  A mother with two children who works full time at the minimum wage would lose about $2,000 a year when the plan is fully in effect in 2018 as compared to how she fares under current policies.

The plan substantially redesigns both the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC).  To be sure, under the redesign, working poor families with children would receive a higher CTC.  But, the plan cuts the EITC deeply for such families, with the cuts reaching their full dimension in 2018.  And, combined, the CTC and EITC changes would leave many struggling working poor families worse off, pushing them into — or deeper into — poverty.

One can compare Chairman Camp’s proposals for the CTC and EITC to the current tax code in two ways.  Policymakers expanded the CTC and EITC in 2009 and subsequently extended those expansions through 2017.  One can compare the Camp plan to current EITC and CTC policies — or to the EITC and CTC policies that will be in place if these expansions are allowed to expire (unlike many other tax provisions that are regularly extended).  Either way, many working poor families with children would lose out.

  • A mother with two children who works full-time year-round at the minimum wage (earning $14,500 by working 2,000 hours at the $7.25 minimum wage) would lose about $2,000 in 2018 (when the plan’s changes in these credits would take full effect) compared to current policy — that is, compared to the CTC and EITC policies on the books today.
  • That mother would lose nearly $350 compared to current law — that is, even if the CTC and EITC improvements of 2009 were allowed to expire entirely at the end of 2017, which itself would cause a substantial reduction in these families’ incomes.

The $2,000 loss would mean a drop of about $1 an hour compared to what a minimum wage worker receives under current policy from wages and tax credits.  Republicans also have made clear that they would not alleviate the problem by raising the minimum wage.

The Camp plan’s sharp hit on these working poor families is especially stunning given that many Republicans, in opposing any minimum wage increase, have said the EITC is a better way to help people working for low wages to make ends meet. It’s hard to see how Republicans reconcile their criticisms of the poor for not working enough, their opposition to raising the minimum wage, and, now, a proposal to sharply cut the EITC.

A basic test for tax reform should be how it treats working-poor families.  The 1986 Tax Reform Act passed that test with flying colors, easing working-poor families’ tax burdens and increasing the EITC.  For many working-poor families, the Camp plan charts the opposite course.  It fails this test.

Don’t Forget What Happened When Obama First Proposed Chained CPI

February 24, 2014 at 3:17 pm

Most media coverage of the President’s decision not to include the “chained CPI” for cost-of-living adjustments in Social Security and other retirement programs in his 2015 budget has left out a key point to understanding the announcement.

When the President was preparing his 2014 budget early last year, Republican leaders strongly urged him to include the chained CPI, and he did.  But House Budget Committee Chairman Paul Ryan then failed to put the proposal in his budget, which included no Social Security savings (and fewer Medicare savings over ten years than the Obama budget).

More importantly, Representative Greg Walden, chair of the National Republican Congressional Committee, called the President’s chained CPI proposal “a shocking attack on seniors,” attacked the President for “trying to balance the budget on the backs of seniors,” and signaled that Republican challengers in 2014 would attack Democratic incumbents over it.  He and other Republicans also noted that their budget — the Ryan budget — did not include the proposal.

To be sure, House Speaker John Boehner distanced himself from Walden’s remarks.  But the message was clear: after urging the President to include the chained CPI in his budget, Republicans left it out of theirs, and various Republican challengers were likely to use it to portray Democrats as seeking to cut Social Security (and themselves as the defenders of Social Security beneficiaries).

Coming on top of the Ryan budget, the Walden statement had a toxic impact on congressional Democrats.  That combination may have been one of the most important political developments that ultimately brought us to the Administration’s announcement.