1) The fiscal conservatives should argue that as long as revenues increase more than expenses (better than 1:1), we should increase funding to the IRS. After that, the expense outweighs the direct reward.
2) There's a huge moral hazard when we don't enforce tax laws. People become more emboldened to cheat on taxes. Increased funding should also rein in future frauds. So even if you spend $2 to collect $1, if that deters future fraud it is possibly worth more than the $2 spent
There’s also a cost to honest taxpayers who are false positive audited that must not be ignored. Having been through it last year for tax year 2015, I and my Enrolled Agent spent close to 75 hours combined for a net result of around $500 increase in 2015 tax owed and a corresponding offset of the same amount in 2016 because I got the timing wrong on a payment that hit Jan 2016 instead of Dec 2015.
That likely cost the IRS a comparable, if not greater, amount of hours. Increasing the funding is not beneficial when it results in more audits like mine.
Obviously we can afford to diminish a 20.0 BCA and still make tons of money, but I wonder what the actual limit of this would be.