GOP rails against IRS funding in Inflation Reduction Act

Republican lawmakers are fuming about the large boost in funding for the IRS included in the $400 billion tax, health care and climate package passed by Democrats in the Senate over the weekend.

The bill provides nearly $80 billion to strengthen the IRS, more than half of which will go specifically to increased enforcement efforts such as audits. Twenty-five billion will go toward operational support, nearly $5 billion will go toward new technology and $3 billion will go to services for taxpayers, like making IRS agents available to answer questions over the phone.

“The Democrats’ reckless IRS funding increase would raise enforcement funding by nearly 70 percent above what IRS is currently projected to get,” Republican Sen. Mike Crapo (Idaho), ranking member of the Finance Committee, said of the bill on the Senate floor over the weekend.

During the extended voting session of the Senate that lasted well into Sunday, Crapo unsuccessfully filed an amendment to the bill to explicitly prevent the IRS from using the additional enforcement funding on taxpayers who earn less than $400,000 per year.

While the amendment was shot down by Democrats in the Senate, IRS chief Charles Rettig wrote identical letters to the House and Senate last week stressing that the new enforcement funding would comply with an order from the Treasury Department to make sure that audit rates of people making less than $400,000 a year would not rise.

“These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” Rettig wrote in an Aug. 4 letter. “As we’ve been planning, our investment of these enforcement resources is designed around the Department of the Treasury’s directive that audit rates will not rise relative to recent years for households making under $400,000.”

Rettig argued that wealthy taxpayers and large corporations are often able to manipulate the tax code by employing large and sophisticated legal teams that are beyond the reach of average taxpayers.

“The integrity and fairness of our tax administrative system relies upon the ability of our agency to maintain a strong, visible, robust enforcement presence directed to these and other similarly situated taxpayers when they are noncompliant,” he wrote.

Despite Rettig’s reassurances, House Ways and Means Committee ranking member Kevin Brady (R-Texas) expressed doubt that the agency would be able to keep its word and focus on rich taxpayers.

“They can’t target just the wealthy. Frankly, they do get targeted today,” Brady said on the Fox News Channel on Monday. “But there’s simply so many more IRS agents that will be unleashed on the American public, and of course it’s going to land on those Walmart shoppers and middle-class families.”

Republicans have stated that the funding boost is going to be used to hire 87,000 new IRS agents. The number is likely speculative,  and was picked up after the Republican National Committee cited a figure from the right-wing advocacy group Americans for Tax Reform.

“There are a lot of bad things in this bill. But few are worse than the proposal by Democrats in this bill to double the size of the IRS and create 87,000 new IRS agents,” Sen. Ted Cruz (R-Texas) said in a Monday statement. “I guarantee you citizens in every one of our states, if you ask them, what do they want, they don’t want 87,000 new IRS agents.”

In a press conference held Tuesday with South Carolina Gov. Henry McMaster, Sen. Lindsey Graham (R-S.C.) slammed the IRS funding provision in the Inflation Reduction Act as a mechanism of government overreach.

“If you think the federal government is out of control now, God help us when you get 87,000 new IRS agents who are looking under every rock and stone to get money out of your pocket,” he said.

Indeed, the agency is now in the process of a hiring spree, but it’s unrelated to the Democratic legislation. The IRS announced a plan earlier this year to hire 10,000 new IRS agents over the next two years to help it reduce a huge backlog of tax returns initially caused by shutdowns during the pandemic.

Analysts say the actual legislative language of the Democrats’ bill is somewhat open-ended on exactly how the funds for increased enforcement need to be spent.