As Congress prepared to vote on President Joe Biden’s $700 billion climate, tax and health care bill earlier this month, the head of the US tax collection agency send one letter to the legislators who ask for their approval.
Charles Rettig, commissioner of the Internal Revenue Service, knew that an $80 billion funding increase for the agency included in the bill was becoming one of the most controversial measures in the package among Republicans and joined his defense.
“We are the greatest country in the world, but the agency that touches more Americans than any other continually struggles to receive sufficient resources to fulfill its important mission,” said Rettig, who was appointed to the position by the former president Donald Trump.
“For too long, the IRS has failed to conduct meaningful and impactful examinations of large corporations and high-net-worth taxpayers to ensure they are paying their fair share,” he added.
The bill, including the IRS provisions, was passed by large Democratic majorities on Capitol Hill and signed into law by Biden. Since then, Republican outrage has mounted, presented in a steady stream of conspiracy-theory-fueled accusations that the Biden administration was recruiting tax collectors to go after political enemies along with ordinary households and businesses.
Those attacks multiplied after FBI agents raided Trump’s Mar-a-Lago estate last week, as critics sought to link the two as similar cases of the same oppressive federal government.
“Are they going to have a strike force come in with AK-15s already loaded ready to shoot a small businessman in Iowa?” Chuck Grassley, the veteran Iowa Republican senator and longtime member of the Senate Finance Committee who is running for re-election this year, asked Fox News this month.
“I think they go after the middle class and small business owners because they basically think that anyone who has ‘pass-through income’ is a thief and not paying their fair share,” he added, referring to the business profits that are being recorded . in individual statements.
The IRS has weathered many political storms under various presidents. Richard Nixon was criticized in the 1970s for wanting the agency to increase its scrutiny of his political enemies. More recently, under Barack Obama, he faced investigation for disproportionately challenging the tax-exempt status of conservative organizations.
Last year, the agency again came under fire from the right after the tax returns of some of the wealthiest Americans were leaked to ProPublica, the investigative news organization. Rettig also came under fire from the left for not releasing Trump’s tax returns, despite pressure from Democratic lawmakers.
“The IRS has never been the king of government agencies. It has always ranked low in terms of popularity,” said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. “The people and the politicians who represent them don’t like the enforcement arm of the IRS.”
“These controversies are completely fabricated, but they are based on the old anti-tax hysteria that ‘the taxman will come for you,'” said Emily DiVito, senior program director at the left-leaning Roosevelt Institute think tank.
Many tax experts have said a funding boost for the IRS was overdue. According to the Center on budgets and political priorities think-tank, the IRS’s budget is 20 percent below its 2010 level when adjusted for inflation, while its full-time employees have declined by a fifth. The audit rate has dropped 54 percent for large companies and 71 percent for millionaires. The “tax gap,” which measures the difference between taxes owed and taxes collected, is now around $600 billion a year, a Treasury official said.
Biden administration officials said the increased funding spread over a decade would be used for technology upgrades, better customer service and additional staff, including replacing a number of planned retirements and increasing of the audits of the richest taxpayers. Over time, that would raise new revenue to pay for the bill’s spending and reduce the budget deficit, they added.
He has also been seen as crucial to restoring more fairness to the US tax administration after years of concern, particularly on the left, that wealthier companies and individuals with offshore accounts and complex partnerships benefit from a lax tax treatment and had comparatively lower compliance rates. with middle class families.
“There shouldn’t be a two-tiered tax system,” said Natasha Sarin, adviser for tax policy and implementation at the US Treasury.
But the Republican attacks have put the Biden administration on the defensive, forcing them to make clear that the funding would not and should not be used for more audits of Americans making less than $400,000 a year . Biden campaigned in 2020 on a promise not to raise taxes on families making less than $400,000.
“Contrary to the misinformation of opponents of this legislation, small businesses or households making $400,000 a year or less will not see an increased chance of being audited,” U.S. Treasury Secretary Janet Yellen said in a letter to Rettig this month.
But Republicans, who have otherwise struggled to find ways to attack Biden’s latest economic package in a way that resonates with Americans, have not shied away from branding these provisions as a major political goal and the issue is likely to remain a feature of midterm election campaigns. .
“They’re going after people who make less than $400,000 a year, which is a direct violation of President Biden’s promise. Everybody knows that’s who they’re going after,” Steve Scalise, a Republican from the Louisiana Chamber.