The IRS is pushing anew for $80 billion in funding to more than double its workforce and crack down on tax cheats, an initiative that has stalled because of opposition from Republicans citing the potential for abuse by the agency.
Natasha Sarin, the Treasury Department’s counselor for tax policy, said in a release that Tax Day, which falls on Monday, represents an “inflection point” and that the IRS has been grappling with the “most challenging” tax filing season in recent history.
She said that while the Internal Revenue Service has collected more than 130 million tax returns and disbursed more than $220 billion in refunds and credits, the agency is underfunded and “massively” understaffed.
“The IRS knew walking into this filing season that it did not have the workforce or technology in place to serve the American people the way they deserve — to pick up the phones when taxpayers call, to help them access all the credits and benefits to which they are entitled, and to ensure that each and every taxpayer receives their refund quickly,” Sarin said.
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“The IRS has a plan in place to get through its backlog of unprocessed returns this year. But so long as funding remains insufficient, the system will be at risk of these kinds of failures and Americans won’t have the kind of service they deserve,” Sarin said.
The Treasury is asking Congress for $80 billion over the next decade. The request was part of President Joe Biden’s Build Back Better spending plan, which fell apart when it became clear that key centrist Democrats would not end up voting in favor of the ambitious proposal.
The Biden administration has said the IRS needs the money to hire more staff and said the cash infusion would give it more authority to crack down on those who are evading taxes. The administration has asserted that it can raise $700 billion in revenue over 10 years through that $80 billion investment alone.
The Congressional Budget Office found that if Congress authorizes the $80 billion, it would grow the IRS’s budget by more than 90% by 2031. Additionally, the spending is expected to double the agency’s staff.
Sarin also said that more funding for the IRS would help close the country’s tax gap, which is the difference between taxes that are owed and collected.
Deputy Assistant Secretary for Tax Policy Mark Mazur testified last year that there will be a $7 trillion tax gap over the next decade. He told Congress that the IRS estimated there was a $381 billion net tax gap between 2011 and 2013.
“If we take those numbers and extrapolate them to today, assuming that the estimated tax gap grows with the economy, the estimated tax gap would be around $580 billion for 2019,” Mazur said. “Over the coming decade, if we use the same sort of estimates, the gross tax gap is projected to total $7 trillion — obviously, that is a lot of money.”
Republicans have pushed back on the administration’s efforts to boost funding for the IRS and, given how slim Democrats’ majority is in both chambers, have imperiled efforts for Biden to increase the agency’s funding.
Last year, investigative nonprofit organization ProPublica released details about the tax returns of thousands of the nation’s wealthiest people, a leak so expansive it covered some 15 years. The leak, the source of which hasn’t yet been released, has bolstered the GOP’s resolve against giving more money to the IRS.
Republicans have actively worked to limit IRS funding, especially in the fallout of the controversy over the IRS’s admission in 2013 that it had targeted conservative nonprofit organizations for added scrutiny. Many Republicans were already wary of Biden’s IRS overhaul proposal before last year’s leak.
Republican animosity toward the IRS had thawed a bit in recent years after Trump Treasury Secretary Steven Mnuchin endorsed adding funds and the 2019 enactment of bipartisan reforms.
In the aftermath of the ProPublica leak, some top Republicans aired their concerns about the controversy in letters sent to acting Treasury Inspector General Richard Delmar.
“Regrettably, it appears personnel with access to American’s personal and confidential information are again misusing protected information for political reasons,” five GOP senators wrote in a letter to Delmar. “Treasury and the IRS must hold accountable any and all individuals who broke federal law by inappropriately sharing the confidential tax information and tax returns of multiple Americans.”
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Despite the Republican opposition, Sarin and the Treasury Department are hoping that Tax Day would be a good day to re-up the push for more funding. Sarin expressed hope that Congress might act and give the IRS some more money before next year’s Tax Day.
“The prescription for the agency going forward is clear: the IRS needs stable, long-term funding. $80 billion over the course of the next decade will finally give the IRS the capacity to modernize and invest in a 21st-century workforce,” she said.
