Republicans have come under fire for their rhetoric over $80 billion in funding for the IRS, including a massive climate, tax and health bill that Congressional Democrats are sending to the White House.
The 10-year funding is intended to help the IRS enforce various provisions of the Inflation Reduction Act that would generate more than $700 billion in new revenue by introducing a 15 percent minimum corporate tax, taxing stock buybacks and extending a cap to Deductions for business losses, in addition to assisting the IRS in enforcing existing tax laws. Of the $80 billion, more than half would be used for increased enforcement, such as audits.
Republicans harboring grievances about the IRS dating back to the Obama administration, further ignited by disputes over former President Trump’s tax returns, have targeted the funding, arguing it points to the creation of a new army of IRS agents who are supposed to be pursuing taxpayers.
But the IRS, Democrats and outside experts all say the new enforcement money will primarily allow the IRS to focus on auditing the wealthy.
“Contrary to the misinformation from opponents of this legislation, small businesses or households making $400,000 a year or less will not see an increase in the likelihood of being audited,” Treasury Secretary Janet Yellen wrote to IRS Commissioner Charles Rettig in a letter dated 12.11.
Appearing on Fox & Friends this week, Sin. Chuck Grassley (R-Iowa) questioned whether the IRS would be willing to send armed units of agents to small businesses in Iowa.
“Are they going to have a reaction force that goes out with AK-15s already loaded and ready to shoot some small business owner in Iowa with it, because I think they’re targeting middle class and small business owners, because that’s what they think everybody, who has a pass-through income is a crook and he’s not paying his fair share and we’re going to go after him,” he said.
In using the term “conduct” Grassley was referring to owners of certain types of businesses, such as partnerships and sole proprietorships, where income may be included on their owners’ tax returns. The Democrats’ Anti-Inflation Act expands a limit on pass-throughs’ ability to use losses to write off costs such as salaries and interest. The limits were originally established by the Trump administration’s Tax Cuts and Jobs Act of 2017.
Democrats said such views should be considered unscrupulous.
“The inflammatory conspiracy theories that Republicans are promoting about armed IRS agents are becoming increasingly dangerous and out of control,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in a statement.
“Senior Republicans, including the former Treasury Committee chairman, are saying shockingly irresponsible things,” he continued, seemingly referring to Grassley’s comments. “It’s incredible that we have to say this at all, but it’s not going to be 87,000 armed IRS agents with assault weapons going door to door. This is funding for answering phone calls and upgrading computer systems. I would hope that House Republicans will act responsibly today as the House considers the Anti-Inflation Act.”
Grassley’s office fired back at Wyden’s testimony. An adviser to Grassley said in a statement to The Hill that “The Democrat party’s proposal calls for an additional $80 billion to increase IRS enforcement, including hiring an additional 87,000 IRS employees, which will no doubt lead to more scrutiny.” targeting American small businesses—at their expense. Unfortunately, the Democrats’ focus is more on IRS enforcement than providing much-needed tax services. It’s shockingly disingenuous to argue that all of these new agents will only be taking calls.”
Fact-checking websites have also targeted some of the rhetoric and online chatter fueling Republican arguments about the increased tax enforcement budget.
The Poynter Institute, a journalism school and media studies center in Florida, called claims that the new funding would militarize the IRS “flaky.”
“One outlandish allegation indicated that these new IRS agents could soon come to you, armed to the teeth, to collect your taxes, were it not for a dramatic early-morning intervention by Delta Force soldiers,” fact-checker Jeff wrote Cercone for the Poynter Institute Politifact website about a hoax published prior to Grassley’s appearance on Fox and Friends.
Democrats have long argued that the IRS needs a significant boost in funding as audit rates and hiring levels have fallen over the past decade. They say the lack of audits has benefited wealthy taxpayers, a finding supported by a tax compliance report released in May by the Government Accountability Office, the government’s internal watchdog.
The report found that in recent years, “audit rates have fallen for all income brackets — with the largest declines in audit rates for taxpayers earning $200,000 or more.”
Findings like these have prompted Democrats to plead for more enforcement at the IRS and to call out Republicans for getting in the way.
“For decades Republicans have starved the IRS of funding, and now American taxpayers are paying the price,” Richard Neal (D-Mass.), chair of the House Ways and Means Committee, said in a statement in February. “The IRS needs more support to carry out its most important tasks, such as processing tax returns, enforcing tax legislation and closing the tax loophole. Without the resources of Congress to update its woefully outdated technology, the agency simply cannot perform at the level that American taxpayers expect.”
Republican lawmakers have repeatedly opposed providing more money to the IRS.
“This extra money for the IRS to target all Americans is dead wrong. It’s going to target our families, it’s going to target our small businesses, and it’s going to come after them to get them to pay more money,” Sen. Rick Scott (R-Fla.) said back in December 2021 of the success the Democrats Build Back Better legislation, which also proposed increasing IRS enforcement funding.
Experts say it’s not entirely clear how the IRS will actually use its new funds.
The “language of the bill was pretty generic,” said Janet Holtzblatt, a former tax analyst for the Congressional Budget Office, in an interview. “It doesn’t really go into the specifics of how the money fits into a specific task. She certainly doesn’t say how many employees there will be, how much will be spent on computers, how much will be spent on rent. But all of that will be covered.”
Republicans have made the argument that 87,000 new tax collectors are targeting the middle class, citing a Treasury Department report released in May 2021 that said $80 billion would allow 86,852 new full-time employees at the IRS. Experts say they are not all accountants.
“They have not provided any details as to how they came up with this very accurate figure,” said Janet Holtzblatt. “But they never said they would all be auditors. The report states that part of the new workforce would be customer service representatives to help resolve issues.”
The Republicans have settled on the figure of 87,000 and sense a political opportunity.
“I guarantee you citizens of any of our states, if you ask them what they want, they don’t want 87,000 new IRS agents,” Senator Ted Cruz (R-Texas) said after proposing an amendment to the strike for additional funds the IRS from the Democrat bill.
Republicans have also said the language doesn’t mean the IRS will only go after corporations and the wealthy.
“They are created to test you,” Cruz said, before pointing to an estimate by Republicans on the House Ways and Means Committee that an estimated 700,000 of the 1.2 million new tests that could be done as a result of the new funding taxpayers will account for $75,000 or less.
The number of 87,000 new accountants has also been criticized by fact-checking websites. Washington Post fact-checker Glenn Kessler called it “wildly excessive” when he gave House Minority Leader Kevin McCarthy (R-Calif.) “three Pinocchios” for the claim.
The Treasury Department and the IRS have both asserted that wealthy people and corporations, whose audit rates have fallen more sharply in recent years relative to ordinary Americans, are intended targets.
The IRS Criminal Investigations Division (IRS-CI), which is a federal law enforcement officer like the FBI and US Marshals, told The Hill that they don’t target any segment of America’s taxpayers other than people who cheat on their taxes.
The department said in a statement to The Hill that its “special agents are sworn law enforcement officers who investigate tax crimes and criminal activity, which may include gangs, drug dealers and other dangerous criminals.” To carry out their daily duties such as search warrants and arrests, CI Special Agents carry firearms. They also receive continuous yearly training to carry firearms.”
In an interview with The Hill, IRS-CI spokeswoman Anny Pachner said that “the IRS Criminal Investigation Division has approximately 3,000 employees. About 2,100 or about 2,000 of those are special agents, federal law enforcement officers. They investigate financial crime and US tax violations. Our agents track criminals who defraud taxpayers and the federal government. It is their job to investigate these crimes, make sure they are stopped and return the funds to the victims.”