Bush budget looks to beef up IRS

WASHINGTON -- President Bush would strengthen the Internal Revenue Service's ability to pursue tax scofflaws, rich and poor, in a $2.23 trillion budget for 2004 that he will send Congress on Monday.

The initiative will be part of a fiscal blueprint that will project federal deficits for each of the next five years, though the shortfalls will decline annually, a Republican familiar with the Bush administration's plans confirmed Saturday.

The unbroken string of red ink seemed all but certain since Friday, when administration and congressional sources said Bush's plan envisioned record deficits of $307 billion this year and $304 billion in 2004. The shortfalls already have become a political battleground between Bush and Democrats.

The president's budget -- encased in a white cover bearing a blue-line drawing of the White House -- would commence a fresh round of tax cuts, slow the growth of federal agency budgets to an overall 4 percent, and use $400 billion over the coming decade to overhaul Medicare by adding prescription drug coverage.

Bush would give the IRS a 5.3 percent boost to $10.4 billion for the budget year that begins Oct. 1.

That will include $133 million for added audits of businesses and high-income taxpayers, including those who hide their income offshore, the Treasury Department said.

"Americans' sense of fairness dictates that all Americans should pay their fair share," Pamela Olson, the Treasury Department's assistant secretary for tax policy, said in a written statement. "The president's budget for the IRS will target the real problem areas in a fair and evenhanded manner."

To reduce fraud, the IRS would use an additional $100 million to gather added information on people before they qualify for the earned income tax credit, which provides benefits to lower-earning Americans.

The proposal would seek to let private collection agencies help the IRS pursue people who owe unpaid taxes. Similar plans have failed in the past due to objections that taxpayers' rights might be violated.

More than $13 billion in unpaid taxes are going uncollected because the IRS lacks the resources to pursue them, the Treasury Department said. In addition, the department believes that up to $9.9 billion in earned income tax credits were paid in error.

In 2001, only 0.58 percent of all taxpayers' returns were audited, according to IRS data. That included audits of 0.69 percent of those from people earning more than $100,000 annually, and 0.4 percent of those making below $25,000.

Along with another budget initiative to boost the Securities and Exchange Commission's funds, the IRS proposal underlines the ongoing political sensitivity of last year's scandals involving Enron and other major companies found to have used misleading accounting.

Democrats said they supported the concept of going after people who cheat on their tax returns, but withheld judgment on the plan's details. They predicted the administration will claim the initiative would produce billions in extra revenue and keep federal deficits from appearing even worse -- a tactic budget-writers have used before.

Renewing their charges that Bush has revived huge deficits and done nothing to contain them, Democrats noted that even before Saturday's crash of the space shuttle Columbia, the White House had not sent any officials to sell the plan on the Sunday news talk shows.

"They don't want to talk about it," said Sen. Kent Conrad, D-N.D., top Democrat on the Senate Budget Committee. "Believe me, they know none of this adds up."

Administration officials have said reviving the economy and defending the country are higher priorities than balancing the government's books. White House budget office spokeswoman Amy Call said talk show producers were simply interested in other topics.

"This is a budget that we feel is good for America, and we'll work hard to get Congress to pass it," she said.

Other highlights of Bush's budget include:

--His 10-year, $674 billion economic growth plan, all but $4 billion of which are tax cuts.

--A proposal to give the states more leeway shaping Head Start programs for low-income preschoolers.

--An extra $12.7 billion over the next seven years for states that want to revamp the Medicaid benefits they provide in partnership with the federal government, though their money would be reduced in future years.

--His $400 billion, 10-year Medicare plan, though its details are unclear following congressional criticism from both parties.

--$399.1 billion for defense spending, from $382.2 billion this year.

--Freezes or only slight increases for many domestic programs, and cuts from others, including reduction of $144 million in Labor Department's employment and training programs.

--$41.3 billion for overall homeland security spending, up from $37.7 billion expected this year.

--Added resources for special education, school districts with many poor students, veterans' health care, preventing diseases, grants to communities for public housing, and battling AIDS in Africa and elsewhere abroad.