WASHINGTON (AP) — After more than a decade of heavy losses, the Internal Revenue Service One can finally get the long-desired cash in an economical package Democrats are working hard to push Congress before their August break.
Under a deal brokered by Senate Majority Leader Chuck Schumer and West Virginia Sen. Joe Manchin, the bill would spend an additional $79.6 billion over the next 10 years for the embattled agency. The plan would generate an additional $203.7 billion in revenue for the federal government over that period, 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 pass key climate and health care priorities ahead of fall midterm elections..
Democrats say the IRS investment is needed to ensure that corporations and wealthy Americans pay in taxes. But Republicans warn it could lead to scrutiny of small business owners and others who are already burdened enough.
The IRS has been increasingly on the receiving end of congressional funding battles over the past dozen years. In April, IRS Commissioner Charles Rettig told members of the Senate Finance Committee that the agency’s budget has fallen more than 15% over the past decade when accounting for inflation, and the number of full-time employees was close to 79,000 last fiscal year. to 1974 levels.
Enforcement personnel have been hit even harder, down nearly 30% since 2010, even as the filing population has grown.
“Every measure important to effective tax administration has suffered tremendously in recent years, with serious deficiencies 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 every few years, regardless of whether IRS commissioners serve a Republican or Democratic administration.
“They’re begging us to give the IRS some resources so they can do their job,” Carper said.
Democrats see an opportunity to change that. More than half of their proposed spending increases will go to enforcement. The next largest chunk, $25.3 billion, goes to support operations such as rent, security and postage. Another $4.75 billion will improve call-back services and other technology designed to improve customer service. And $3.2 billion will go to pre-filing and educational assistance.
Senate Finance Committee Chairman Ron Wyden, D-Ore., called the investment “necessary as a tool to make sure we have a rational tax system.”
“This gives us an opportunity to raise revenue from the wealthy tax cheats without paying what they owe,” Wyden said.
GOP lawmakers denounced the plan and described a larger IRS as a tool to bully constituents.
“At a time of inflation, even Democrats want to spend $80 billion to 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 taxpayers’ lives worse,” Senate Republican Leader Mitch McConnell said on the Senate floor Thursday.
“I think it’s terrible for them to weaponize the Internal Revenue Service, supersize it in an effort to go after 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 specific complaint is that the Democratic proposal would put more resources toward customer service than focusing on enforcement. Pandemic Health and safety concerns forced the IRS to temporarily close its processing facilities. This caused unprecedented delay And the challenges with the IRS are still hard to come by.
“First, take care of the good, honest taxpayers who are trying to get basic help from the IRS,” R-Mont. Sen. Steve Dines said.
In a letter to lawmakers Thursday, Rettig emphasized that the resources in the package would return the IRS to historical norms in areas where the agency has been challenged. They include large corporations and high-net-worth taxpayers, as well as multinational taxpayers, where sophisticated, specialized teams are needed to unpack complex structures. He also said audit rates will not increase compared to recent years for those with annual incomes below $400,000.
“These resources are not about increasing audit scrutiny of small businesses or middle-income Americans,” Rettig wrote.
CBO estimates indicate that the IRS measures would represent about one-sixth of the revenue raised by the bill, which would go toward helping people buy private health coverage, increasing federal investments in renewable energy such as wind and solar power, and paying down the debt. other things.
It’s unclear what elements of the Democratic tax proposals might change before the Senate finishes work on the bill, but Wyden said he’s confident a boost in spending for the IRS will be in the final package.
“I can tell you, so far, I have no objection in the Democratic caucus to this provision that increases IRS resources so they can go after wealthy tax cheats,” Wyden said.