WASHINGTON (AP) – After more than a decade of mostly losing, the Internal Revenue Service may finally get the cash infusion it has long wanted in the financial package that Democrats are working furiously to push 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 on the beleaguered agency over the next 10 years. The plan would generate an additional $203.7 billion in revenue for the federal government over that time frame, for 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 push through key climate and health care priorities ahead of the midterm elections. autumn..
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 lead to increased scrutiny of small business owners and others who are heavily burdened.
The IRS has mostly been on the losing end of congressional funding battles for the past dozen years. In April, IRS Commissioner Charles Rettig told members of the Senate Finance Committee that the agency’s budget has fallen by more than 15 percent over the past decade when adjusted for inflation, and that the number of full-time employees dropped to 79,000 in the last fiscal year. was close. to 1974 levels.
Law enforcement staffing has been hit even harder, falling by about 30 percent since 2010 even as the filing population has grown.
“Every measure important to effective tax administration has suffered greatly in recent years, with deep shortfalls resulting 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 from IRS commissioners every few years, regardless of whether they serve a Republican or Democratic administration.
“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 their proposed spending increase will go to enforcement. The next biggest chunk, $25.3 billion, would go to support operations such as rental, insurance and postage. Another $4.75 billion will go toward improving callback services and other technology designed to improve customer service. And $3.2 billion will go to preliminary and educational assistance.
Senate Finance Committee Chairman Ron Wyden, D-Ore., called the investment “necessary as a tool to ensure that we have sound tax policy.”
“This will give us an opportunity to raise revenue from wealthy tax evaders who avoid paying what they owe,” Wyden said.
GOP lawmakers lash out at the plan and portray a larger IRS as a means of harassing voters.
“In a time of inflation, Democrats also want to spend $80 billion to roughly double the size of the IRS so they can take more money from the American people through harassment and audits, using taxpayer money to make life worse for taxpayers,” Republican Leader Mitch McConnell said on the Senate floor Thursday.
“I think it’s terrible for them to want to weaponize the Internal Revenue Service, to oversize 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. – Wow. “It’s basically a shakedown operation.”
A particular complaint is that the Democrats’ proposal should have allocated more resources to customer service instead of focusing on enforcement. The pandemic forced the IRS to temporarily close its processing facilities for health and safety reasons. This led to unprecedented delays and challenges with the IRS still struggling to catch up.
“First, take care of the good, honest taxpayers who are just trying to get basic help from the IRS,” said Sen. Steve Daines, R-Mont.
In a letter to lawmakers Thursday, Rettig emphasized that the package’s resources would restore 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 sophisticated, specialized teams are required to unpack complex structures. He also said audit rates would not increase from past years for those with less than $400,000 in annual income.
“These resources are not at all about auditing small businesses or middle-income Americans,” Rettig wrote.
CBO projections show that the IRS measures account for about one-sixth of the revenue raised by the bill, with that revenue helping people buy private health coverage, boosting federal investment in renewable energy sources like wind and solar power and pay off debt, among other things.
It’s unclear what aspects of the Democrats’ tax proposals could change before the Senate wraps up work on the bill, but Wyden said he’s confident the spending boost for the IRS will remain in the final package.
“I can tell you, so far, I’ve had no objection to the Democratic caucus on this provision of increasing the resources of the IRS so they can go after wealthy tax cheats,” Wyden said.