The bill signed Tuesday – arguably President Joe Biden’s signature achievement since taking office – will inject $80 billion into the IRS, a lifeline that will help the emaciated agency fulfill its mandate, fill the state coffers and its federal government to manage tax law.
In just a decade, headcount at the IRS has fallen nearly 20%, the Washington Post noted, “including a 30% reduction in enforcement staff.” Democrats have been eager to find a way to bolster the ailing agency after years of Republicans trying to weaken it.
“For decades Republicans 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 the tax code and closing the tax loophole. Without resources from Congress to update its woefully outdated technology, the agency simply cannot perform at the level that American taxpayers expect.”
Thanks to the Inflation Reduction Act, the IRS will finally get that support. And Republicans are not happy about it.
The GOP has for years tried to starve the IRS of revenue and resources in hopes — to borrow a phrase from anti-tax crusader Grover Norquist — of making it small enough to drown in a bathtub.
Republicans have made the ludicrous claim that the Biden administration aims to deploy a reinforced “army” of IRS agents to target middle-income workers and small businesses. Nothing is further from the truth. In fact, IRS Commissioner Charles Rettig — who was appointed by former President Donald Trump — said earlier this month that the agency would only step up audits of the wealthiest Americans.
As with the recent Republican attacks on the FBI, the party’s anti-IRS rhetoric has peaked. Sen. Ted Cruz (R-Texas) tried to scare an IRS.shadow army
‘ to ‘hunt you and take your money’.
Senator Chuck Grassley (R-Iowa) even suggested using IRS operatives armed with assault rifles against taxpayers on Fox & Friends last week. He and other Republicans have mistakenly thrown around the figure of 87,000 as the size of this supposed army of agents.
“Are they going to have a strike force marching in with AK-15s already loaded and ready to shoot a small business owner in Iowa?” asked the longtime senator. “With 87,000 additional employees, you can imagine what this nuisance will be for middle-class Americans and our small business owners.
Democrats said such rhetoric was wrong and inflammatory.
“The inflammatory conspiracy theories that Republicans are promoting about armed IRS agents are becoming increasingly dangerous and spiraling out of control,” said Senator Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, calling the language used by “senior To classify Republicans as talking about increasing funding for the IRS is “appallingly irresponsible.”
“It’s incredible that we have to say this at all, but there won’t be 87,000 armed IRS agents going door-to-door with assault weapons. This is funding for answering phone calls and upgrading computer systems,” he said.
The ultra inflammatory rhetoric seems new, but the attacks are part of a long-standing GOP agenda to keep the agency underfunded and ineffective. There were definitely signs of growing GOP opposition to the IRS under Presidents Bill Clinton and George W. Bush, but it really picked up steam (as with so much else) when Barack Obama was President. The Government Accountability Office recently found that the total number of IRS audits has fallen in recent years and is now at its lowest level in generations.
By hampering the effective work of the IRS, the GOP allows wealthy Americans to avoid much – if not most – of their tax burden. Exam rates have also fallen – especially for the wealthiest Americans. GAO reported that “audit rates have fallen the most for taxpayers with incomes of $200,000 or more.” The New York Times, meanwhile, reported that the audit rate for millionaires has fallen by over 60% since 2010.
While individuals in the top percentile of total wealth once accounted for nearly a third of all total audits, during the administration of then-President Donald Trump, they accounted for less than 10% of actual audits still taking place. Economists Gabriel Zucman and Emmanuel Saez, in an analysis of American wealth inequality, wrote that audit rates on the largest estate tax returns have been almost completely eliminated in recent years.
Even when audits find evidence of a crime, many tax fraudsters avoid prosecution: the number of criminal leads has fallen by almost half since the early 2010s. Taken together, the White House estimates that the wealthiest Americans evade about $160 billion a year – a huge sum considering we’re only talking about 1 percent of the American population.
Whichever way you look at it, expanding IRS funding is a win. The CBO predicts that curbing tax evasion by America’s wealthiest will pay dividends many times over, in addition to slowing offshore financing and reducing wealth inequality.
Not all new IRS funds go to enforcement. A significant portion of the funds will also go toward technology upgrades and basic operations, CNBC reported. (Amazingly, some computers at the IRS still use programs from the 1960s.)
The Congressional Budget Office has already projected hundreds of billions of dollars in revenue from this new IRS funding over the next decade alone. That’s money that can be used to pay for other provisions of the Anti-Inflation Act, from funding climate initiatives to keeping prescription drug prices down.
Indeed, there’s a kind of virtuous circle at work in the new legislation: A beefed-up IRS allows the federal government to pay for projects that can help generate jobs — and additional tax revenue — in the future.
But that’s all in the years to come. For now, the fact that the IRS is set to be financially bailed out is cause for celebration. The IRS is not becoming a “shadow army” like Cruz would like it to be. Instead, it is an agency born out of financial constraints that will finally be able to do its job on behalf of the American people.