Tougher IRS enforcement at heart of Dem economic package

WASHINGTON – After more than a decade of mostly losses, the Internal Revenue Service could finally get the cash injection it has long wanted in the economic package that Democrats are pushing through Congress ahead of their recess of August.

Under a deal struck by Senate Majority Leader Chuck Schumer and West Virginia Sen. Joe Manchin, the bill would spend an additional $79.6 billion on the beleaguered agency over the course of of the next 10 years. The plan would generate $203.7 billion in additional revenue for the federal government over that period, for a net gain of more than $124 billion, according to Congressional Budget Office projects.

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As the Senate prepares to begin voting on the bill in the coming days, the IRS proposal has become a magnet for GOP attacks, testing Democratic unity as they attempt to addressing key climate and healthcare priorities ahead of the midterm elections in the fall.

Democrats say the IRS investment is needed to ensure corporations and the wealthiest Americans pay what they owe in taxes. But Republicans warn that this will lead to increased scrutiny of small business owners and other sufficiently burdened people.

The IRS has mostly been the loser in Congressional funding fights over the past twelve years. In April, IRS Commissioner Charles Rettig told members of the Senate Finance Committee that the agency’s budget had shrunk more than 15% over the past decade when adjusting for inflation. and that the number of full-time employees at 79,000 in the last fiscal year was close. at 1974 levels.

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The law enforcement workforce has been hit even harder, declining by around 30% since 2010, even as the depot population has grown.

“Every important measure for effective tax administration has suffered enormously in recent years, with deep shortcomings resulting from underinvestment in human capital and information technology,” Rettig said.

Sen. Tom Carper, D-Del., a longtime member of the Senate Finance Committee, said he hears the same thing from IRS commissioners every few years, whether they serve of a Republican or Democratic administration.

“They’re begging us to provide resources to the IRS so they can do their job,” Carper said.

Democrats see an opportunity to change that. More than half of their proposed spending increase would go to enforcement. The next biggest chunk, $25.3 billion, would go to supporting operations, like rent, security and postage. Another $4.75 billion would be used to improve callback services and other technologies designed to improve customer service. And $3.2 billion would go to pre-filing and education aid.

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Senate Finance Committee Chairman Ron Wyden, D-Ore., called the investment “essential as a tool to ensure we have sound fiscal policy.”

“It will give us the chance to increase the income of wealthy tax evaders who avoid paying what they owe,” Wyden said.

GOP lawmakers denounce the plan and describe a larger IRS as a way to harass voters.

“In times of inflation, the Democrats also want to spend $80 billion to roughly double the size of the IRS so they can extract more money from the American people through harassment and audits, using the money taxpayers to make taxpayers’ lives worse,” the Senate said. Republican Leader Mitch McConnell said Thursday in the Senate.

“I think it’s terrible for them to want to militarize the Internal Revenue Service, to overkill it in order to go after, you know, families and farmers and small businesses and try to collect more money. ‘money,” said Sen. John Barrasso, R.-Wyo. “It’s basically a shakedown operation.”

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One particular complaint is that the Democratic proposal should have put more resources into customer service rather than focusing on enforcement. The pandemic has forced the IRS to temporarily close its processing facilities for health and safety reasons. This has led to unprecedented delays and challenges, with the IRS still struggling to catch up.

“First, take care of good, honest taxpayers who are just trying to get basic help from the IRS,” said Sen. Steve Daines, R-Mont.

In a letter to lawmakers Thursday, Rettig stressed that the package’s resources would bring the IRS back to historic standards in areas that challenge the agency. These include large corporations and high net worth taxpayers, as well as multinational taxpayers, where sophisticated and specialized teams are needed to unpack complex structures. He also said audit rates would not increase from past years for those with annual incomes below $400,000.

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“These resources are absolutely not intended to increase audit control over small businesses or middle-income Americans,” Rettig wrote.

CBO projections indicate that the IRS measures account for about one-sixth of the revenue generated by the bill, with that revenue earmarked to help people buy private health coverage, spur federal investment in renewable energy such as wind and solar power and to pay down debt, among others. other stuff.

It’s unclear what aspects of the Democratic tax proposals might change before the Senate completes its work on the bill, but Wyden said he’s confident increased spending for the IRS will remain in the final package. .

“I can tell you, so far, I haven’t had any objections in the Democratic caucus to this provision to beef up the resources of the IRS so they can go after wealthy tax cheats. “Wyden said.