Republicans argued that the $80 billion boost to IRS funding included in the Democratic inflation bill would end up hurting lower- and middle-class taxpayers, rather than the billionaires advertised by Democrats.
Democrats say that the Inflation Reduction Act provision to bolster IRS tax enforcement will net $124 billion in revenue, a figured calculated by the Congressional Budget Office. But Republicans say the extra $80 billion in funds would bloat the government agency and would cause it to go after average people in order to close the tax gap.
Sen. John Thune (R-SD) said at a press conference Wednesday that the funding would about double the number of IRS staff.
BIPARTISAN GROUP OF FORMER TREASURY SECRETARIES BACK MANCHIN-SCHUMER BILL
“Think about that, literally double the size of the IRS. Why? Not to improve taxpayer service — only 4% of the money goes to improving taxpayer service. This goes to allowing the IRS to harass businesses across this country,” Thune said.
During the news conference, Republicans pointed to a Joint Committee on Taxation analysis from last year about revenue from underreported income indicating that lower- and middle-class households could be in line for higher tax bills.
While Democrats have said the funding would allow the IRS to target millionaires who have avoided paying taxes, the analysis found that of the revenue projected to be raised from underreported income, 40% to 57% would come from taxpayers earning $50,000 or less.
It found that 78% to 90% would come from taxpayers making less than $200,000 annually, and a mere 4% to 9% would come from those making more than $500,000 per year.
“If you have 87,000 auditors coming on board, only 4%-9% of that tax gap is in those making more than $500,000. They must have to go, in their audits, after those in the lower income categories,” Sen. Mike Crapo (R-ID) told reporters. “And that’s what my colleagues are complaining about.”
Sen. James Lankford (R-OK) said at the press conference that while the Democrats contend that the influx of new IRS agents would help go after wealthy tax evaders, within the legislation, there are no limits to who and what can be audited.
“They can do any audit of any individual of any small business or any farmer that they want to be able to do,” Lankford said, pointing out that the IRS spends 10 times as much on audits as it does on taxpayer services.
Regarding taxpayer services, Lankford said he has constituents who have told him they have had to wait on hold with the IRS for hours or even days and others who said they have been working on a single case with the IRS for years without answers.
The IRS funding is just one plank of the legislation that is being condemned by GOP lawmakers. Most of their disagreement with the bill is targeted at Democrats’ proposal to levy a 15% minimum tax on the book income of companies.
The United States currently has a 21% corporate tax rate, which it assesses based on companies’ tax returns. The new plan would assess a minimum 15% tax on the adjusted financial statement income of corporations, a provision Democrats argue would raise $313 billion in new tax revenue.
A recent JCT analysis that is being touted by Republicans found that because of increased taxes on corporations, people in every tax bracket would suffer losses and that the overall tax burden for those earning less than $200,000 annually would increase by $16.7 billion in 2023.
Republicans say that the increased financial burden violates President Joe Biden’s campaign promise not to raise taxes on anyone making less than $400,000 annually.
The White House has pushed back on that assertion and said that the JCT analysis leaves out key details.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“A family making less than $400,000 will not pay one penny in additional taxes under the Inflation Reduction Act,” said a spokeswoman for Democrats on the Senate Finance Committee. “The analysis Republicans are pointing to is also incomplete. It doesn’t include the benefits to middle-class families of making health insurance premiums and prescription drugs more affordable. The same goes for clean energy incentives for families.”
The legislation includes hiking taxes on carried interest, a form of income earned by private equity funds that is subject to a lower tax rate.
