House Republicans have made good on a campaign promise by approving a bill that would zero-out funding from the Inflation Reduction Act (IRA), which is intended to dramatically increase the IRS’ enforcement abilities — and, Democrats and the government say, target wealthy tax cheats.
Conservatives have cast the money another way, over pushback from the Treasury Department.
Our first bill will repeal funding for 87,000 new IRS agents, because the government should be here to help you, not go after you,” declared newly minted House Speaker Kevin McCarthy upon taking the gavel early Saturday morning and ushering in a new session under Republican control.
The nonpartisan Congressional Budget Office, which analyzes bills for lawmakers, reported in an analysis on Monday that the GOP’s IRS measure, known as the Family and Small Business Taxpayer Protection Act, from Rep. Adrian Smith, R-Neb., would raise the deficit by $114 billion.
On Monday, the House passed the proposal in a party-line vote, 221-210.
The proposal has little chance of passing the Democratic-controlled Senate to head to President Joe Biden’s desk.
Republicans claimed throughout the midterm campaign that Democrats were sending “an army of IRS agents” to go after middle- and lower-class taxpayers with the new agency funding in the IRA, which passed along party lines last year.
Some Republicans even went so far as to suggest that the IRS agents would be armed.
Both claims are misleading.
The IRS has said it plans over the next decade to use the roughly $80 billion from the IRA to update its antiquated technology systems, after years of under-funding by Congress, and hire and train new information technology specialists and customer service representatives as well as new agents, only a small fraction of whom — in the Criminal Investigation division — are armed.
The Treasury Department estimated in a 2021 report that $80 billion would fund just under 87,000 new employees, but not all of those would be new agents.
The IRS currently has about 82,000 employees, according to past congressional testimony, of which more than half are eligible for retirement over the next five years.
Democrats and the Biden administration have said they plan to use the new IRS enforcement capability to help close the yawning tax gap, which is the amount the IRS is paid by taxpayers versus the actual amount that is owed. That shortfall is estimated to be roughly $310 billion, according to a recent IRS analysis released to the Joint Committee on Taxation.
Democrats also planned to use the increased tax revenue to help pay for the IRA itself.
“House Republicans’ legislation would allow wealthy and corporate tax evaders to continue avoiding taxes owed, increasing the burden on honest, hardworking families who pay their taxes with every paycheck,” a Treasury spokesperson said in a statement to ABC News. “The IRS audits nearly 80% fewer millionaires than a decade ago, and this legislation would deny the agency much-needed resources to hire top talent to go after the $163 billion in taxes avoided by the top 1% annually.”
Just before congressional Democrats passed the IRA, both the IRS and the Treasury Department — to which the IRS reports — told lawmakers the new funding would not impact those making less than $400,000 annually, a key campaign promise of President Biden.
“The IRS has struggled for many years with insufficient resources to fulfill our important mission. During the next 10 years, these funds will help us in many areas, including adding critical resources to not just close the tax gap but meaningfully improve taxpayer service and technology,” IRS Commissioner Charles Rettig, an appointee of former President Donald Trump, said in a statement in mid-August shortly before the Democrats’ climate, tax and health care bill passed.
That same month, Treasury Secretary Janet Yellen explicitly directed Rettig not to use the new funding to increase audits of taxpayers earning under $400,000.
Yellen also singled out “misinformation from opponents of this legislation.”
But Republicans say they are not buying the assertions from administration officials and have vowed to keep up scrutiny of the IRS and, in particular, Biden’s nominee to lead the agency, Danny Werfel — a former acting commissioner and top budget official under Presidents Barack Obama and George W. Bush.
Rep. Jason Smith, R-Mo., was selected by House Republicans on Monday to lead the powerful Ways and Means Committee, which oversees all tax law. Smith vowed that Werfel, if confirmed, “should plan to spend a lot of time before our committee” and encouraged whistleblowers to come forward.
Smith also indicated his panel would probe the “leaking of sensitive taxpayer information,” a reference to some of former President Donald Trump’s tax records being leaked to the media.