The IRS Finally Got Some Funding. Now Republicans Want It Back.

Surprise, surprise.

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The very first item on this week’s House legislative schedule, after the chaotic selection of a House Speaker and seating of members—including the scandal-plagued and apparently very unpopular freshmen George Santos (R-N.Y.)—is consideration of the ill-named Family and Small Business Taxpayer Protection Act.

This Republican bill is ill named because what it really does is protect tax cheaters by repealing most of the $80 billion in new IRS funding provided under last year’s Inflation Reduction Act (IRA). 

If any of you political junkies feel a touch of déjà vu, that’s understandable. Neutering the IRS was also, after all, a big priority for Republicans back in 2010, the last time they won the House back from the Dems. And neuter the taxman they did. As I wrote previously:

From 2010 to 2018, even as the IRS received 9 percent more tax returns, its annual budget was slashed by $2.9 billion—a 20 percent reduction that cost the agency more than one-fifth of its workforce. Investigations of non-filers plummeted and the amount of outstanding tax debt the IRS formally wrote off (based on the 10-year statute of limitations for collections) more than doubled—from less than $15 billion in 2010 to more than $34 billion in 2019.

Virtually no partnerships were audited in 2018. By then, with Donald Trump in the Oval Office, the kneecapped IRS was scrutinizing the individual returns of just 0.03 percent of those $10 million–plus taxpayers, down from a peak of 23 percent in 2010. Audits of the $5 million–to–$10 million filers fell from just under 15 percent to a scant 0.04 percent.

A fair subset of superwealthy Americans doesn’t even bother filing. The Treasury Department’s Inspector General for Tax Administration reported in 2020 that nearly 880,000 “high income” non-filers from 2014 through 2016 still owed $46 billion, and the IRS was in no condition, resource-wise, to collect. The 300 biggest delinquents owed about $33 million per head, on average. Fifteen percent of their cases had been closed without examination by IRS staffers, and another one-third weren’t even in line to be “worked.”

The new agency funding—$80 billion over 10 years—was intended to remedy this shameful state of affairs. The Congressional Research Service said the money would be used to modernize the tax agency’s decrepit systems, provide operations support, improve taxpayer services, and “monitor and enforce taxes on digital assets such as cryptocurrency.”

But perhaps most importantly, it would bolster the agency’s ability to hire specialized enforcement agents—tax professionals with the expertise needed to decode the opaque and voluminous returns of slippery folks like the Trumps, who have armies of sophisticated tax lawyers and accountants on their payroll. 

The return on investment, simply from collecting taxes owed, would be substantial. The Congressional Budget Office estimated the new enforcement measures alone could reap $204 billion over 10 years—about $4.50 per dollar spent. 

No matter. As the IRA legislation moved toward passage last year, Republican officials and Trump minions unleashed a barrage of lies on social media, falsely claiming the IRS would use the money to hire 87,000 new agents and go after ordinary taxpayers—like you! The House GOP seems inclined to double down on that fear-mongering. In a press release, the nonprofit group Americans for Tax Fairness points out that the repeal legislation would rescind nearly $72 billion of the promised funding—90 percent of the total—including:

  • $45.6 billion for tax enforcement activities to catch wealthy and corporate tax cheats

  •  $25.3 billion in operations support for tax enforcement programs and taxpayer services, which is critical for ensuring taxpayers get refunds on time and phone calls answered

  • $403 million for the Inspector General for Tax Administration, which promotes integrity, economy and efficiency of the federal tax system

  • $153 million to beef up the U.S. Tax Court to resolve taxpayer and IRS disputes

  • $15 million for the IRS to prepare a report on what it would take to create a free, government-run tax e-filing system that would make it much easier for taxpayers to file their tax returns without paying a private service to help them

“The richest 1 percent avoid paying $160 billion a year that they owe in taxes due to inadequate tax enforcement. Republicans are voting to let them keep on cheating the rest of us,” lamented Frank Clemente, ATF’s founder.

With the Democrats in control of the Senate, this particular vote may be largely performative. But Steve Rosenthal, a senior fellow at the Tax Policy Center and former staff lawyer for Congress’ nonpartisan Joint Taxation Committee, told me he suspects that IRS funding will be an ongoing issue in Senate battles and future congressional budget debates—including the contentious upcoming fight over the debt ceiling.

Republican lawmakers, in any case, seem to have a fetish for performative votes on anti-tax bills written to benefit America’s wealthiest. As I pointed out in my book last year, after a who’s who of dynastic families spent millions lobbying for the repeal of inheritance taxes, congressional Republicans introduced no fewer than 44 bills over a decade aiming to do precisely that. 

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