WASHINGTON (AP) – After more than a decade of mostly losing, the Internal Revenue Service may finally get the infusion of cash it has long wanted in the economic package that Democrats are working furiously to push through Congress before August break.
Under a deal worked out by Senate Majority Leader Chuck Schumer and West Virginia Sen. Joe Manchin, the bill would spend an additional $79.6 billion at the beleaguered agency over the next 10 years. The plan would generate $203.7 billion in additional revenue for the federal government over that time period, with a net gain of more than $124 billion, the Congressional Budget Office projects.
As the Senate prepares to begin voting on the bill in the coming days, the IRS proposal has become a magnet for GOP attacks, testing Democratic unity as they try to deliver on priorities climate and health key before the autumn mid-term elections.
Democrats say the IRS investment is necessary to ensure that corporations and the wealthiest Americans pay what they owe in taxes. But Republicans warn that it will increase scrutiny of small business owners and others who are already burdened enough.
The IRS has mostly been on the losing end of congressional funding battles for the past twelve years. In April, IRS Commissioner Charles Rettig told members of the Senate Finance Committee that the agency’s budget had been cut by more than 15% over the past decade when takes into account inflation and that the number of full-time employees of 79,000 in the last fiscal year was close. to 1974 levels.
Enforcement staff have been hit even harder, falling by 30% since 2010, even as the reporting population increased.
“All the measures that are important for effective tax administration have suffered enormously in recent years, with deep deficiencies stemming from underinvestment in human capital and information technology,” Rettig said.
Sen. Tom Carper, D-Del., a longtime member of the Senate Finance Committee, said he hears the same thing every few years from IRS commissioners, regardless of whether they serve a Republican administration or democrat
“They’re asking us to provide some resources to the IRS so they can do their job,” Carper said.
Democrats see an opportunity to change that. More than half of the proposed spending increase would go to enforcement. The next largest portion, $25.3 billion, would go to operations support, such as rent, security and postage. Another $4.75 billion would go toward improving callback services and other technologies designed to improve customer service. And $3.2 billion would go toward pre-filing and educational assistance.
Senate Finance Committee Chairman Ron Wyden, D-Ore., said the investment was “essential as a tool to make sure we have sound fiscal policy.”
“This will give us an opportunity to increase the income of wealthy tax cheats who don’t pay what they owe,” Wyden said.
GOP lawmakers decry the plan and tout a bigger IRS as a means to bully voters.
“In an age of inflation, Democrats also want to spend $80 billion to roughly double the size of the IRS so they can squeeze more money out of the American people through harassment and audits, using taxpayer dollars to make taxpayers’ lives worse,” the Senate said. Republican Leader Mitch McConnell told the Senate Thursday.
“I think it’s terrible for them to want to arm the Internal Revenue Service, increase it in an effort to go after, you know, families and farmers and small businesses and try to collect more money,” said Sen. John Barrasso, R. -Wyo. “It’s basically a shakedown operation.”
One particular complaint is that the Democratic proposal should have put more resources into customer service instead of focusing on enforcement. The pandemic forced the IRS to temporarily close its processing facilities for health and safety reasons. This has led to unprecedented delays and challenges with the IRS still scrambling to catch up.
“First, take care of the good, honest taxpayers who are just trying to get basic assistance from the IRS,” said Sen. Steve Daines, R-Mont.
In a letter to lawmakers Thursday, Rettig stressed that the package’s resources would return the IRS to historical standards in areas that challenge the agency. These include large corporations and high-net-worth taxpayers, as well as multinational taxpayers, where specialized and sophisticated teams are needed to unpack complex structures. He also said audit fees would not increase from past years for those with less than $400,000 in annual income.
“These resources are not at all about increasing audit scrutiny of small businesses or middle-income Americans,” Rettig wrote.
CBO projections indicate that the IRS measures account for about one-sixth of the revenue raised by the bill, with that revenue going to help people buy private health coverage, increase federal investments in renewable energy such as ‘wind and solar energy and pay off the debt, among other things.
It’s unclear what aspects of the Democratic tax proposals might change before the Senate finishes work on the bill, but Wyden said he’s confident the increased spending for the IRS will remain in the final package.
“I can tell you, so far, I’ve had no objection in the Democratic caucus to this provision to increase the resources of the IRS so they can go after wealthy tax cheats,” Wyden said.