Biden administration goes to war with Republicans over $80billion IRS enforcement:
Republicans are fighting back against Democrats’ plans to bolster IRS enforcement to generate revenue to pay their inflation-cutting spending bill.
Tucked into the $433 billion reconciliation deal reached between Democratic leader Chuck Schumer and top moderate Democrat Senator Joe Manchin, $80 billion over 10 years is to expand the IRS and make sure Americans get their fair share of pay taxes.
According to the Congressional Budget Office, strengthened enforcement would net $127 billion over a 10-year period.
The Democrats, also known as the Inflation Reduction Act, hope to pass the bill next month without Republican votes. It involves at least $260 billion in new spending over a 10-year period, and would also increase taxes by $326 billion over that period, according to an analysis by the impartial Joint Committee on Taxation.
The deal, which would include $433 billion in government spending on climate and health programs, would finally give President Biden and Democrats a major policy win ahead of the midterm elections.
Democrats plan to enforce existing laws and close loopholes and set a minimum corporate tax to raise money for the bill. Republicans, however, are sounding the alarm about giving more money to the IRS.
“They’re just going to attack every small business owner,” Senator Rick Scott, R-Fla., said Huffington Post. ‘We know how the Tax and Customs Administration treats people. You are guilty until proven innocent.’
“In this bill, there is legislation to hire 86,000 additional IRS agents – to increase the IRS, put them on steroids. Do the math, it’s a million dollars per IRS agent,” Senator John Barrasso, R-Wyo., said at a news conference Wednesday.
“You don’t need so many IRS agents to go after some people they say are very, very rich. This is coming after the families, and the farmers, and the small businesses of America,” he warned.
“They’re just going to attack every small business owner,” Senator Rick Scott, R-Fla., said according to the Huffington Post. ‘We know how the Tax and Customs Administration treats people. You are guilty until proven innocent
Senate Banking Committee member Mike Crapo said in a press release this week that it was a “myth” that the additional funding would allow the IRS to crack down on wealthy tax frauds and companies that fail to pay their fair share.
sen. Senate Banking Committee member John Thune, RS.D., said too much money went to enforcement and not enough to customer service.
“This is an agency that has only managed to answer about one in 50 calls during the 2021 tax season,” Thune said on the Senate floor. “Yet four percent of the $80 billion goes to tax authorities — 57 percent goes to enforcement, so the IRS can spend more time harassing taxpayers in this country.”
“All this money goes to the IRS. You would think it would go first to technology and second to tax authorities, which are related,” Senator Rob Portman, a member of the Senate Banking Committee, said at a GOP news conference Thursday.
“What it does is double the size of the IRS in terms of people it will monitor,” he said. “That will affect small businesses, farmers, ranchers, and so on.”
Senate Banking Committee member Mike Crapo said in a press release this week that it was a “myth” that the additional funding would allow the IRS to crack down on wealthy tax fraud and companies that don’t pay their fair share.
“The bulk of new revenue from hiring an army of IRS auditors will be overwhelming for low- and middle-income people who are already struggling with high gas prices and 9.1 percent inflation,” he said.
Citing a report by the Joint Tax Committee, he argued that much of the “tax gap” consists of misreported trading or business activities (Schedule C items) or other income-generating activities (Schedule E items). Those who make less than $100,000 are most likely to report Schedule C or E items.
The Treasury Department has claimed the opposite – that the vast majority of undeclared revenue comes from those who over $100,000.
“Referring to all the tax gaps and misreporting numbers as a result of ‘tax cheats’ is deception, as significant sums come from hard-working taxpayers simply struggling to comply with an overly complex tax code, which will become even more complex when the final tax is imposed.” – and-spend bill becomes law,’ said Crapo.
Marc Goldwein, an economist with the Committee on a Responsible Federal Budget, argued that improving enforcement has traditionally been a two-pronged priority.
“Every president, from Ronald Reagan to Donald Trump, has supported more IRS funding to close the tax gap,” Goldwein said.
The White House touted a statement by three ex-IRS commissioners endorsing the provisions and “debunk lies about increased enforcement affecting everyone but Rich Tax Cheats”:
“As former IRS commissioners, we have watched the agency closely over the years and understand all too well that the status quo is untenable: The IRS has a workforce that has shrunk to 1970s levels. with a technological infrastructure that no longer exists for decades. date and a control rate that has fallen by 50 percent. The continued, multi-year funding in the reconciliation package is critical to help the agency rebuild.”
“This bill is about getting to the bottom of the problem,” write Fred Goldberg, Charles Rossotti and John Koskinen, “and pursuing high-end taxpayers and corporations who are now illegally evading their tax obligations.”
The IRS has a workforce that has shrunk to 1970s levels, with technology infrastructure that is decades out of date and a control rate that has fallen by 50 percent.
Republicans have said the bill would increase historically high inflation, and violate President Biden’s promise not to raise taxes on anyone earning less than $400,000.
Central to the bill’s tax provisions is a minimum corporate tax rate of 15 percent on the approximately 200 companies that bring in more than $1 billion a year, expected to generate $313 in revenue over 10 years.
Republicans have predicted that the increase will be passed on to employees who will earn less or consumers who will pay more, not shareholders.
The Joint Taxation Committee found that low- and middle-income households could pay an additional $16.7 billion in taxes next year as a result of the bill.
But the White House has noted that that estimate doesn’t account for increased benefits and tax credits for these households.
“Once you factor in the spending side and the other taxes that are left out — and that includes household tax credits for various energy items, lower drug prices and health care subsidies — the middle class will be ahead in distribution,” Goldwein said, according to Bloomberg Tax.