The Inflation Reduction Act included an $80 billion increase over ten years for the Internal Revenue Service. Subsequently as part of the agreement on the debt ceiling, the IRS budget would be cut by up to $21.4 billion over three years. The dueling between the Republicans, who want to cut the IRS budget, and the Democrats, who want to increase it, leaves the actual future of the IRS funding in limbo. It appears that the IRS will get some additional money, but not all that the Democrats wanted.
The Democrats argue that increasing the IRS budget would allow the IRS to collect additional taxes that are not being paid and would actually increase the government’s income. The AP reports:
“The Congressional Budget Office has projected that the $1.4 billion rescission will actually increase deficits by about $900 million over the next decade because it will lead to less tax revenue coming in. ‘CBO anticipates that rescinding those funds would result in fewer enforcement actions over the next decade and in a reduction in revenue collections,’ states the May 30 report to Speaker Kevin McCarthy, R-Calif. The CBO’s projections did not include the $20 billion that the White House agreed to divert to other programs.”
The Republicans claim that the additional IRS agents would go after low- and middle-class taxpayers, while the Democrats argue that they would go after wealthy taxpayers. The Democrats say that the current IRS staffing shortages means that it now audits lower income taxpayers more than wealthy ones.
Politico said in May;
Republicans’ proposal to rescind $71 billion in IRS funding pushed through by Democrats last year would cut projected tax receipts by $191 billion over the next decade, the nonpartisan Congressional Budget Office estimates.The result: The government would find itself an additional $120 billion in the hole….
The IRS has just 2,600 people who are responsible for examining the 390,000 wealthiest Americans, including people making more than $10 million and large corporations, Commissioner Danny Werfel told lawmakers last month.
And their filings, he added, can be exceedingly complex.
“The returns that come from our wealthiest filers are sometimes thousands, tens of thousands and sometimes hundreds of thousands of pages long,” said Werfel.
Though forecasters agree spending a dollar on an audit generates that and more in savings to the government, how much more is disputed. CBO initially said last year that Democrats’ plans would produce an additional $207 billion in revenue, which, once the $80 billion was taken into consideration, would save a net $127 billion over a decade.
The agency later ratcheted that down to $100 billion after Yellen, in response to Republican complaints, said the IRS would not increase audits of people making less than $400,000.
It looks to me like the Republicans are taking care of their rich supporters, some of whom may be cheating on their taxes, and want to keep cheating. Republicans go nuts criticizing shoplifting and violent criminal activity but are not concerned about millionaires and billionaires who may be cheating the government out of millions of dollars in taxes that the law requires them to pay. Republicans and Democrats favor unequal enforcement of the law, but they disagree on which laws should be enforced. Democrats say ignore crimes by poor people; Republicans say ignore crimes by rich people.
The money saved by rich people cheating on their taxes is in addition to the many tax breaks that are written into the law at the behest of special interest lobbyists – all kinds of deductions and exemptions that are very hard to track for individuals who are involved in complicated businesses.