Stop me if you’ve heard this one before. A candidate running for President, or maybe even The President of the United States, pushing for legislation tells the public that the rich aren’t paying their fair share. Their plan won’t cost YOU, the “average folks,” a penny — but it will “make the wealthy pay their fair share.”
The plan gets implemented, and as sure as the sun rises in the east, everybody gets stuck paying more.
That is what just happened with Joe Biden’s so-called “Inflation Reduction Act” (IRA).
Part of the legislation was a massive $80 billion increase in funding for the IRS over 10 years, an increase of nearly 70 percent over the past decade. The primary goal of increasing the IRS’ budget is to reduce the deficit by closing the tax gap — the difference between taxes owed and taxes paid. The Treasury Department estimates the net tax gap to be approaching $600 billion.
In addition to the $80 billion in the “Inflation Reduction Act,” Biden’s budget proposal for FY24 includes another $1.8 billion for the IRS, an additional 15 percent increase. When he announced his budget, Biden trotted out the tired cry to “make sure corporations pay their fair share” and the ever-popular promise “not to go after ordinary folks because they are paying their fair share.”
In 2021, the nonpartisan Congressional Budget Office (CBO) estimated that a similar $80 billion IRS proposal (originally part of Biden’s “Build Back Better” plan) would yield another $207 billion in total revenue over 10 years. The CBO estimates the net impact of the additional tax enforcement measures in the bill will decrease the deficit by $127 billion through 2031. The catch, however, is $43 billion of the additional revenue will occur between 2022 and 2026. The remaining $164 billion comes between 2027 and 2031. In other words, don’t bet on it.
When Biden signed the IRA, Republicans howled that 87,000 new IRS agents would harass citizens with increased audits. Biden, Treasury Secretary Janet Yellen, Senate Majority Leader Chuck Schumer, then-House Speaker Nancy Pelosi, Congressional Democrats, and the IRS pledged that only those making more than $400,000 a year would face increased scrutiny.
Fact-checkers from mainstream media, including the New York Times, Time magazine, and others, went hyperbolic, stating it was misleading to claim there would be 87,000 new tax agents. The figure came from a 2021 Treasury Department report estimating staffing levels necessary to maintain efficiency.
The entire $80 billion isn’t for increased enforcement, but more than half — $45.6 billion — is. Whether that means hiring more agents, legal support, or investing in “investigative technologies” is a matter of semantics. The enforcement budget increased by 69 percent.
The next largest chunk, $25.3 million for “operations support,” which the Congressional Research Service (CRS) says includes “rent, facilities, printing, postage, and security, as well as telecom and information technology. These funds can also go toward research and the IRS Oversight Board.” While this sum isn’t for new agents per se, it’s part of what the IRS requires for additional audits.
In addition to telling the public that the IRS would focus on going after high-income tax cheats, Democrats said the money would make the IRS friendlier and more efficient.
The CRS report states: “The IRS has struggled to provide quality service during the Covid-19 pandemic. The number of unprocessed tax returns at the end of the filing season rose from 7.4 million in 2019 to 35.8 million in 2021 and 13.3 million in 2022. Phone service also suffered. Whereas IRS customer service representatives answered 59 percent of phone calls they received in 2019, they answered 19 percent and 18 percent in 2021 and 2022, respectively.” Therefore, the legislation provides an additional $3.2 billion for “Taxpayer Services,” an increase of 9 percent.
That’s $45.6 billion, 69 percent more for increased enforcement – read more audits — versus $3.2 billion, or 9 percent more, for taxpayer services: the friendlier, more efficient IRS.
That dichotomy is why the new Republican majority’s first legislative action was to pass “The Family and Small Business Taxpayer Protection Act.” The bill stripped $72 billion of the $79.6 billion in additional IRS funding. The legislation left funding for taxpayer services and upgrading the IRS’ computer systems. It passed on a straight party-line vote (all Republicans in favor – all Democrats against).
The action was largely symbolic: the Senate won’t consider the measure. Even if it passed the Senate, Biden would veto it.
Upon passage, House Speaker Kevin McCarthy (R-CA) tweeted, “This was our very first act of the new Congress because government should work for you, not against you.” Democrats supporting a more powerful IRS raged. In a statement, Pelosi said, “It is shameful, but not surprising, that House Republicans’ first order of business in this Congress is to protect corporate America and ultra-wealthy individuals who are illegally avoiding taxes.”
The always loquacious Vice President Kamala Harris also released a statement. “House Republicans are rushing to undo that progress and allow too many millionaires, billionaires, and corporations to cheat the system,” she said.
Even as New York Times fact-checker Linda Qiu diligently tried to dismiss Republican concerns, she had to concede: “The budget office estimated increasing IRS funding would return enforcement to its 2010 levels. Doing so would result in about 1.2 million more audits; of those, 583,000 would target people making less than $75,000.”
No matter how many times Biden, Yellen, and others promise that they are only going after those earning more than $400,000 a year, the government’s facts paint a different picture.
A 2021 GAO (Government Accountability Office) report is enlightening. Some highlights:
- From fiscal years 2010 to 2021, the majority of the additional collection the IRS recommended from audits came from taxpayers with incomes below $200,000.
- The average number of hours spent per audit was generally stable for lower-income taxpayers but more than doubled for those with incomes of $200,000 and above.
- Audits of the lowest-income taxpayers, particularly those claiming the EITC [earned income tax credit], resulted in higher amounts of recommended additional tax per audit hour compared to all income groups except for the highest-income taxpayers.
- Lower-income audits tend to have a higher rate of change to taxes owed.
The tax code is complicated. People like Joe Biden wrote it for millionaires and billionaires. Reading between the lines of the GAO report, one might conclude the IRS would rather avoid big-shot accountants and lawyers because it’s easier to crush “ordinary folks.”
It’s not just government statistics that tell the story. Shift focus to what the Biden administration is doing. The day before Biden gave his State of the Union address (February 6, 2023), the IRS introduced “a new service tip reporting program.”
Affectionately dubbed the Service Industry Tip Compliance Agreement (SITCA) program. It’s a “voluntary” (wink-wink) tip reporting program” between the IRS and employers in various service industries. In other words, they are going after waiters, waitresses, bartenders, and other hospitality workers tips.
Rep. Thomas Massie (R-KY) tweeted, “Stop the presses. No need to raise the debt limit. Biden is going after those billionaire waitresses’ tips.”
I have known a woman, Jeanie (not her real name), for over 20 years. She’s elderly, in her eighties. For several years, Jeanie’s only income has come from Social Security and a stipend under Medicare’s Home Health Care program. As one might guess, she didn’t “earn” nearly enough to pay taxes.
She figured the government knew how much she made, as that’s where she gets all her income.
In fairness, legally, Jeanie must file returns, even if her income is minimal. However, when Joe Biden tells you the $80 billion in additional funding for the IRS in the “Inflation Reduction Act” won’t be used “to go after ordinary folks,” remember Jeanie.”
When Nancy Pelosi tells you Republicans repealed the IRS enforcement provisions “to protect ultra-wealthy individuals who are illegally avoiding taxes,” think of your mother or grandmother.
When Janet Yellen testifies to Congress, the additional IRS agents will only impact those making over $400,000, think of the face of the sweetest little old lady you know. Then imagine any of them receiving an intimidating letter from the IRS.
That’s the truth of legislation that increased the IRS budget by $80 billion and will make the wealthy pay their fair share without costing average folks a penny. As Biden requests more IRS funding in his FY24 budget, tell him you’ve heard that fairy tale before.
Andy Bloom is president of Andy Bloom Communications. He specializes in media training and political communications. He has programmed legendary stations including WIP, WPHT and WYSP/Philadelphia, KLSX, Los Angeles and WCCO Minneapolis. He was Vice President Programming for Emmis International, Greater Media Inc. and Coleman Research. Andy also served as communications director for Rep. Michael R. Turner (R-Ohio). He can be reached by email at email@example.com or you can follow him on Twitter @AndyBloomCom.