The Treasury Department said controversial IRS funding that was part of the Inflation Reduction Act will increase tax revenue by some $561 billion over the next decade.
The Treasury Department and the IRS released a joint analysis on Tuesday that examines the projected return on investment for the Inflation Reduction Act. The legislation, which passed in 2022 without Republican support, included a controversial provision that allocated $80 billion in new funding to the IRS.
Republicans opposed the funding, saying it would drive up audits on the middle class. Democrats meanwhile argued that the funding would be used to close the tax gap by going after wealthy tax cheats and would be focused on those earning in excess of $400,000, offering a significant return on investment.
The Biden administration’s analysis found that the legislation will increase revenue by as much as $561 billion from this year until 2034 if kept in place, much more than previous estimates. Additionally, if the funding is renewed when it runs out, as Biden has proposed, estimated revenues would be as much as $851 billion.
National Economic Council Director Lael Brainard said on Tuesday that the analysis shows that the Biden administration’s investment in the IRS will “reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe.”
“Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit,” she added.
The Treasury analysis said that previous estimates of tax revenue growth resulting from the legislation were limited to calculations about increased enforcement staffing. The analysis includes revenue projections resulting from enhanced services to improve voluntary compliance, modernizing technology, and adoption of analytic advances to improve productivity.
Republicans have sought to claw back some of the $80 billion in IRS funding and were fiercely against that provision in the legislation. They have already succeeded in reducing some of the funding.
The analysis gamed out the effects of rescinding funding, something that Republicans will try to do if they end up taking the Senate and the White House after this year’s elections.
For instance, researchers claim that a drawback of $20 billion of that funding would reduce tax revenues by over $100 billion.
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“While the IRS would still be able to ramp up enforcement against big corporations and wealthy taxpayers who do not pay what they owe in the next several years, the rescissions would cause IRA enforcement funding to run out in 2029 — about two years earlier than it would have under the IRA as enacted — reducing the revenue raised in 2029 and subsequent years,” the report reads.
As a result of the legislation, the IRS was able to increase its full-time staff to nearly 90,000 — the highest level it had been at in more than a decade, the agency announced last year.
