White House officials proposed earlier this year to force the Internal Revenue Service to audit more low- and middle-income taxpayers but target fewer large corporations, documents obtained by House investigators show.
The Office of Management and Budget contended that stepping up simple mail audits - which affect mainly those with lower incomes - was the easiest way to boost tax collections quickly.IRS Commissioner Fred T. Goldberg Jr. argued vehemently against that approach.
"IRS would not direct any additional effort into low-income, individual income tax audits as proposed by OMB," IRS officials wrote. "All resources provided for the examination (audit) program should be directed toward the high-asset business and corporate areas consistent with the service's overall compliance strategy."
The dispute came in late December and January as OMB was putting together President Bush's budget for the fiscal year that begins Oct. 1.
Papers relating to the discussions were obtained by the House Ways and Means oversight subcommittee in preparation for a hearing Wednesday on the $6.7 billion IRS budget, which is up 10.2 percent from this year.
"I don't believe it's fair or effective to rely on audits of low- and middle-income taxpayers," Rep. J.J. Pickle, D-Texas, chairman of the subcommittee, said Wednesday.
OMB officials refused to comment on the papers because they were internal documents. The budget office was invited to send a witness to the hearing but declined.
According to the documents, OMB proposed that part of the IRS enforcement budget for the current year be shifted "into individual income tax correspondence audits in order to realize the quick revenue payback of this investment."
The battle over the new IRS budget comes at a time when the agency acknowledges a long-term decline in the percentage of returns being audited. Only about nine of every 1,000 returns will be audited this year.