Is an extra $80 billion for the IRS good news for taxpayers?

·Senior Editor
·8 min read

“The 360” shows you diverse perspectives on the day’s top stories and debates.

What’s happening

When President Biden signed the Inflation Reduction Act into law earlier this month, the bill’s massive investment in green energy and provisions to lower drug prices got much of the headlines. But the legislation also included a major boost in funding for the Internal Revenue Service, the nation’s often-maligned tax collecting agency.

Treasury Secretary Janet Yellen said the investment offers a “monumental opportunity” to transform the IRS, which has been hampered by budget cuts, staffing shortages, outdated technology and massive paperwork backlogs in recent years. Thanks to the new law, the IRS will receive $80 billion in additional funds over the next 10 years, money the agency says it will use to modernize operations, hire more customer service staff and increase its ability to collect unpaid taxes from wealthy Americans.

Republicans and right-wing media figures have railed against this funding increase, with many making the misleading claim that the IRS will use the money to hire 87,000 new auditors to “come after” regular taxpayers. That figure appears to come from a Treasury Department report released last year that estimated the IRS could hire more people over the next decade with additional funding, but the agency says the number refers to staff in all roles — not just enforcement — and that more than half of those hires would be used to replace current staff expected to retire in the near future.

Some conservatives have also falsely claimed that the IRS will use the money to create what Fox News host Brian Kilmeade called a “new army” of agents armed with assault weapons to “hunt down and kill middle class taxpayers that don't pay enough.” The IRS does employ some special agents who carry firearms, but they represent a small fraction of the agency’s workforce and are only used in rare cases of extreme criminality.

The IRS announced Tuesday that it would launch a full safety review of its offices across the country, in response to a barrage of violent rhetoric that its employees have received stemming from these accusations.

Why there’s debate

Although these unfounded claims — and efforts to debunk them — have taken up most of the oxygen around the topic, a more substantive underlying debate is also going on, about whether a major infusion of funding for the IRS is a good thing for individual taxpayers and the country as a whole.

Supporters say the extra money is needed to help the IRS overcome budget shortfalls that have left the agency struggling with backlogs of millions of unprocessed returns, a severe shortage of customer service staff and an inability to chase down wealthy tax cheats. There’s a significant body of research suggesting that the $80 billion will pay for itself, and then some, by allowing the agency to bulk up tax enforcement and close the “tax gap” — the difference in how much Americans owe versus what they actually pay — which is estimated to be about $600 billion annually.

Others are hopeful that a better-funded IRS will help combat inequality. It could accomplish that, they say, by ensuring that the rich pay their fair share of taxes and by reversing trends that have seen lower-income Americans receive audits at much higher rates than the wealthy — largely because their finances are much easier to analyze.

But conservative critics warn that, beyond the scaremongering from the far right, a beefed-up IRS spells trouble for everyday Americans. Some of that concern is rooted in the traditional Republican belief in the dangers of big government. Many others also fear that, despite the reassurances that enforcement will be focused on the rich, the extra money will inevitably lead to more audits for middle-class workers, small businesses and the self-employed. Others say the extra funds would be much more effective if they went to outreach and customer service to help well-meaning taxpayers pay the right amount upfront, rather than forcing them to endure audits after the fact if they make a mistake.

What’s next

Another potentially transformative tax-related element of the Inflation Reduction Act is a measure requiring the IRS to study how it might create a free online tax-filing system accessible to all Americans. A report on the feasibility and cost of creating a government-run free-file program is expected to be completed early next year.

Perspectives

Supporters

Middle-class and low-income taxpayers don’t need to worry about a greater risk of audit

“The long story short here is that the average American should not be threatened by this, but should be thankful that they are putting money into taxpayer services that have dwindled tremendously.” — Bill Hoagland, economic policy analyst, to Vox

Enabling the government to enforce the law should be something Democrats and Republicans agree on

“Americans deserve a faster taxpayer service, and they deserve a system that investigates tax enforcement inequality, so that Americans who pay their fair share are not unfairly burdened by those who do not. This should not be a partisan issue.” — Leslie Book, NBC News

A well-funded IRS is critical to fighting inequality

“An important way to fight income inequality is to increase taxes on the rich and use the money to pay for services all of us need. But raising taxes on paper means little if the wealthy are able to skirt the rules and don’t pay up what they owe. … There’s little sense in passing major overhauls of the tax code to make it fairer and reduce income inequality if no one’s around to actually enforce those changes.” — Bryce Covert, Slate

Better enforcement will mean more money to fund important government programs

“The U.S. relies on voluntary compliance with its tax code, and the American people collectively underpay their taxes by hundreds of billions annually. … Since there’s so much tax noncompliance, including through willful evasion, stricter IRS enforcement more than pays for itself.” — Arthur Delaney, HuffPost

All Americans are hurt when the rich are allowed to skirt their tax responsibilities

“When the IRS can’t catch wealthy tax evaders, who pays the price? All of us who actually follow the rules and pay what we owe. We are paying for their tax evasion. A well-funded IRS is an IRS that goes after the right people — the very wealthy who aren’t paying their fair share of taxes — and protects those of us who are.” — Jon Whiten, The Hill

The GOP is lying about IRS funding to protect their rich donors

“Republicans and the right more broadly want you to believe that the IRS has declared war on you, when the truth is that they declared war on the IRS on behalf of their big donors. It’s not the IRS that financially wants to screw you, it’s the GOP.” — Mehdi Hasan, MSNBC

Critics

The IRS will have no choice but to target the middle class for audits

“The more than $200 billion in new revenue projected to come in because these agents have been hired (what’s being blithely referred to as ‘increased IRS enforcement’) can only be found in the pockets of middle- and working-class Americans. Unlike the superrich, they can’t and don’t employ armies of attorneys and accountants to ensure they don’t pay, as President Biden might say, ‘one thin dime’ more in taxes than the law requires.” — Editorial, Washington Times

A bigger IRS will make out-of-control government spending worse

“The federal government isn’t starving for revenue. Congress wants more tax revenue because it can’t control its appetite for spending. That’s why it wants a tax agency in beast mode.” — Editorial, Wall Street Journal

Giving a big payday to such a loathed agency is a political disaster for Democrats

“What matters most is that with this provision of the weekend spending spree, Democrats have handed Republicans a gift of an issue. And they did it to pay for their new spending on all their pet projects. … The Democrats are the party of the IRS and of wealthy people claiming federal tax credits for new electric vehicles and solar panels for their second homes.” — Hugh Hewitt, Washington Post

The money should be spent on taxpayer support, not audits

“If Congress is not going to stop changing the law several times every year, the IRS has to recognize that people need help complying. … The IRS should be spending vastly more resources to help people comply on the front end, rather than grinding them into powder on the back end when they don’t.” — Daniel J. Pilla, National Review

The real solution to tax evasion is to make the tax code much simpler

“While both sides desperately try to get you to believe one or the other, both are missing the real point. The income tax in this country is far too complicated. Fixing that would take real, difficult and bipartisan work that neither side, apparently, wants to do, but it would make much of today’s debate moot.” — Jay Evensen, Deseret News

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