WASHINGTON ― Republicans are preparing to vote on their first piece of legislation since taking charge of the House of Representatives: a bill that would cancel $71 billion in additional funding for the Internal Revenue Service.
But the bill would cost the federal government more than it saves.
The symbolic legislation fulfills a promise to stop President Joe Biden from wreaking havoc on America’s middle-class families with hordes of IRS agents. Democrats approved extra funding last year to close the gap between what Americans owe the IRS and what they actually pay.
At The Congressional Budget Office said Monday if the Republican Bill becomes law, it will save $71 billion up front, but it will cause the government to miss $185 billion in uncollected tax revenue for a net loss of $114 billion over a decade. (The bill will never become law because Democrats still control the Senate and the White House.)
“It’s a blind tax cut for the rich tax fraud,” White House Chief of Staff Ron Klain said on Twitter of the Republican bill there. “Increase the deficit.”
Deficit haters on the Committee for a Responsible Federal Budget say the bill would “encourage tax fraud” by making it easier for businesses and individuals to shirk their obligations.
“Increasing funding for the IRS is one way to raise more money without raising taxes, and it has a long history of bipartisan support — including from every new President from Ronald Reagan through Joe Biden,” CRFB written in a blog post.
House Speaker Kevin McCarthy (R-Calif.) declared shortly after winning the speaker’s gavel on Saturday that Republicans will “end wasteful government spending.” He won over Republicans who opposed him for speaker in part by promising the House would vote to balance the federal budget within a short period of time.
Slashing IRS funding goes against the goal of balancing the budget, but coincides with the broader Republican complaint that Democrats have “weaponized” the federal government against the average American. Republicans have claimed the new IRS funding approved last year will result in 87,000 new IRS agents to harass people, although it is unclear how many of the new hires will be auditors.
Before the new funding, the IRS budget was 30% lower than it was a decade ago. Former IRS Commissioner Charles Rettig testified last year that the agency is short of 79,000 full-time staff and will need to hire 52,000 people over the next six years just to replace the retiring workforce. The agency previously estimated it could use the funding boost to increase staff by 87,000 over 10 years.
Most “tax gaps” result from households failing to report their business income to the federal government. Unlike wage income, which is reported directly to the federal government so that payroll and income taxes can be deducted, business income is not automatically reported.
Rettig, a Republican appointed by former President Donald Trump, insisted the additional funding would not be used to increase audits for people earning less than $400,000, despite the Congressional Budget Office previously saying “small fraction” of increased revenue will come from households earning less than that amount.
“This resource is really not about increasing audit oversight of small businesses or middle-income Americans,” Rettig said said in a letter to the senator end of summer.