January 16, 2023

By Chuck Ardo

The first piece of legislation passed in the new Republican controlled Congress would slash tens of billions dollars of funding for the IRS. Democrats in the last Congress voted to crack down on rich tax evaders,  by funneling $46 billion to the IRS so it can ferret out money hidden by the ultra-wealthy. Sen. Ron Wyden, the Democratic chairman of the Senate Finance Committee, said “The only way that House Republicans could make it any more obvious that they’re doing a favor for wealthy tax cheats is by coming out and saying it in exactly those words.”  The nonpartisan Congressional Budget Office found that the House Republicans' IRS legislation would increase the budget deficit by $114 billion over 10 years.

The Hill reported that “IRS funding and staffing decreased through nearly all of the 2010s. From 2010 to 2018, IRS data shows that funding for the agency decreased from $14.36 billion to $11.43 billion, a decline of 20 percent in less than a decade. Over the same period, the number of IRS employees decreased more than 22 percent, from 95,000 in 2010 to 74,000 in 2018.These reductions have resulted in far fewer audits. A May report from the Government Accountability Office (GAO) found that during the 2010s, audit rates of individual income tax returns fell from 0.9 percent to 0.25 percent, with the audit rates for wealthier taxpayers dropping more sharply than in other tax brackets.”  

According to CBS news “a new report released by the Transactional Records Access Clearinghouse at Syracuse University found that a millionaire's chances of coming face-to-face with an auditor fell in 2022 to just 1.1%. Although IRS enforcement agents devote a quarter of their time to auditing millionaires, nearly 700,000 millionaires face "no scrutiny whatsoever," the group found. “The number of millionaire tax returns the IRS audits every year has fallen from nearly 41,000 a decade ago to just 16,800 in 2022, with the pace of enforcement slowing as the agency lost funding and personnel.”

The new funding will allow the IRS to restore audit rates to levels of about ten years ago. Although they would effect all taxpayers Treasury Secretary Janet Yellen directed the Internal Revenue Service not to use any of the new funding to increase the chances of Americans making less than $400,000 a year of getting audited and IRS Commissioner Charles Rettig, a Trump appointee has repeatedly said that the new enforcement funds would not be directed at small businesses and families making under $400,000. It’s important to note that for every additional dollar spent on enforcement the IRS estimates it collects about 5 dollars in revenue.“

It would help if opponents of the new funding stop their irresponsible claims that armed IRS agents are about to go after middle-income households.”  wrote Janet Holtzblatt of the Tax Policy Center. “A decade of deep budget cuts reduced audit rates for individual income tax returns to0.4 percent in 2019 from 1.1 percent in 2010. And that was before the pandemic slowed audits. Keeping audit rates at pandemic levels would not be an effective long-term compliance strategy” she said.

The fact that the Republican Party has significant deep-pocketed help from at least 42 billionaires and their spouses should help explain the position taken by the Republicans in the House.