WASHINGTON — IRS Commissioner John Koskinen told a congressional committee Wednesday that a flat tax would save the IRS “a lot” of money in its annual budget, calling it a “sea change” in the way the agency would operate.
Koskinen also explained that every individual who files a tax return using an individual taxpayer identification number (ITIN) and not a Social Security number is not an illegal immigrant.
He cautioned the committee that reporting illegal immigrants to other federal agencies would “discourage” them from paying taxes.
According to the IRS website, the agency “issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for Social Security numbers (SSNs). A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN.”
Rep. Dave Brat (R-Va.) asked Koskinen if he thinks the U.S. has a tax system that treats individuals fairly.
“If they hear from us it’s because of something in their return. We have no interest in what party they belong to, who they voted to, what meeting they went to, the system needs to be fair and in terms of its application as a policy matter but also for tax administration, it’s critical to the system for people to feel comfortable,” Koskinen said at the House Small Business Committee hearing titled “Keep It Simple: Small Business Tax Simplification and Reform, the Commissioner Responds.”
It was previously revealed that the IRS annually issues undocumented immigrants billions in tax credits. A Treasury Department Inspector General report published in 2011 found that $4.2 billion in “refundable credits” were paid to illegal immigrants in 2010.
Brat sought to clarify comments Koskinen made in a recent Senate hearing about illegal immigrants using someone else’s Social Security number to work and an individual tax identification number to file a tax return.
“Should any agency go along with what it knows to be illegal activity?” Brat asked.
“Our responsibility is the administration of the tax code and it’s been made clear that not everybody who has an ITIN as it’s called is an illegal alien –for some reason they can’t get a Social Security number. And so the tax code is set up and our enforcement is that people who are earning money have an obligation to pay taxes, and we do everything we can to make sure they pay those taxes,” Koskinen said.
“To the extent that to get the employment they have borrowed or somehow gotten a Social Security number, that’s not a jurisdiction we have. In other words, our responsibility is to make sure they pay their taxes,” he added.
Koskinen told the committee that if the IRS starts “looking behind the system” and reporting illegal immigrants to other agencies “we’re going to discourage a lot of people from paying the taxes they owe.”
Rep. Blaine Luetkemeyer (R-Mo.) asked Koskinen how much a flat tax would save the agency.
Republican presidential candidate Sen. Ted Cruz (R-Texas) has made the implementation of a flat tax a centerpiece of his campaign.
“I don’t think I have a number for you, but clearly if you had a two-page form or a one-page form where you got rid of the deductions and everything else and people just paid in effect either a flat tax or a graduated flat tax it would be simpler for taxpayers and it would be much simpler for us,” Koskinen said.
Luetkemeyer pressed Koskinen for an amount of savings from the agency’s total budget of $11.2 billion.
“We’d save a lot,” he responded. “I can’t give you a guess but it would be a lot. It would clearly be a sea change in the way the place operates.”