New funding for the Internal Revenue Service authorized by President Joe Biden has emerged as the biggest target for Republicans in attacking Democrats’ recently passed health and climate legislation.
While the GOP has vociferously rejected portions of the Inflation Reduction Act that involve changes to corporate taxation, the provision that is getting the most attention is a plan to increase funding for the IRS to the tune of $80 billion over the next decade. More than half of that spending is earmarked for enforcement.
Democrats envision the funding, which is estimated to add more than 80,000 new positions across the IRS, as a wise move because of understaffing at the agency. The Congressional Budget Office projects the funding would net more than $200 billion in gross revenue by cracking down on tax cheats through audits.
But Republicans, keenly aware of public mistrust of tax collectors, have used the notion of thousands of new auditors as a cudgel against the now-approved funding.
MANCHIN-SCHUMER IRS FUNDING BOOST WILL MEAN AUDITS FOR MIDDLE CLASS, GOP SAYS
This week, Sen. Rick Scott (R-FL) encouraged job seekers not to apply for the new jobs being created at the IRS as a result of the legislation. He vowed that Republicans would end up gutting the new funding should they take back control.
“These new positions at the IRS will not offer you the long-term job stability you may expect from a position with the federal government,” Scott wrote in an open letter. “Put another way: this will be a short-term gig. Republicans will take over the House and Senate in January, and I can promise you that we will immediately do everything in our power to defund this insane and unwarranted expansion of government into the lives of the American people.”
Scott also likened the employees who will help with audits to law enforcement. The IRS has long had a criminal investigation division with agents who carry firearms, and while the increased funding will likely bolster that force, audits are conducted by a separate group and mostly by mail.
“We aren’t talking about joining your local police force, or even the U.S. military – this is the federal agency charged with collecting taxes,” Scott said. “The IRS is making it very clear that you not only need to be ready to audit and investigate your fellow hardworking Americans, your neighbors and friends, you need to be ready and, to use the IRS’s words, willing, to kill them.”
Democrats have countered the GOP in noting that the 87,000 new employees will not all be auditors and include thousands of workers in other roles. Many IRS workers are also expected to retire in the coming years, partially offsetting the number being hired.
“The IRS will lose about 50,000 people over the next five or six years,” Natasha Sarin, the Treasury Department’s counselor for tax policy and implementation, told PolitiFact. “A lot of this hiring is about replacing those people.”
Republican condemnation of the Democratic plan to supercharge the IRS will likely resonate with voters in the lead-up to the midterm elections, as it is the provision in the Democratic legislation that people are most opposed to. Polling on different sections of the bill bears that notion out.
The IRS funding proposal is the only section of the legislation of which more voters disapprove than approve, according to a Politico/Morning Consult survey. Just 40% of respondents said that they either strongly or somewhat approve of the funding, while 46% expressed dissatisfaction.
Republicans have also targeted part of the law imposing 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 proposal would assess a minimum 15% tax on the adjusted financial statement income of corporations.
But that same poll found that a majority of voters approve of the tax change and less than a quarter of those surveyed disapprove, meaning that attacking the IRS plan is likely the better game plan for the GOP.
GOP lawmakers are arguing that the IRS funding proposal would cause people in the middle class to be audited, although the Biden administration has pushed back on that notion and said that the goal is to crack down on wealthy tax cheats.
During the process of passing the Inflation Reduction Act, Sen. Mike Crapo (R-ID) offered an amendment (which failed along party lines) that would have stipulated that none of the new IRS funding would be used to audit those with taxable incomes below $400,000. The CBO later confirmed that had the amendment passed, the IRS funding provision would have netted $20 billion less in revenue.
“CBO has not completed a point estimate of this amendment but the preliminary assessment indicates that amendment 5404 would reduce the ‘non-scorable’ revenues resulting from the provisions of section 10301 by at least $20 billion over” the next decade, the CBO said in a statement.
Treasury Secretary Janet Yellen is hoping to avoid that outcome, though. In a Wednesday memo to IRS Commissioner Charles Rettig obtained by the Washington Examiner, Yellen requests that the agency develop a plan for how the funds will be used and says the plan should not result in households earning less than $400,000 or small businesses seeing an increase in the chances that they are audited, “relative to historical levels.”
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“Specifically, I would like the IRS to work closely with the Deputy Secretary to identify specific operational initiatives and associated timelines that will improve taxpayer service, modernize technology, and increase equity in our system of tax administration by pursuing tax evasion by those at the top who today do not pay their tax bill,” she said.
This week, Biden signed the Inflation Reduction Act into law. The measure passed the House and Senate with no Republican support and was able to pass through the latter only after centrist Democrats like Sen. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) were able to exact key concessions.
