Senate Democrats have broken their internal log-jam and have come up with a new budget reconciliation bill they can agree on. It still has to navigate through the congressional tract a bit before it comes to life, and it could change during that process. That said, it’s beginning to look like something that can be taken seriously.
Of most interest to us at The Picket Line are the sections of the bill that provide additional funding to the IRS. As regular readers know, the agency has suffered from reduced budgets and a diminished workforce at the same time as it has been coping with increasing numbers of taxpayers, additional Congressionally-mandated responsibilities, an evolving and sophisticated threat from identity theft and tax refund fraud, and the disruption that the covid pandemic caused to their offices. As a result, the agency has become pitifully ineffective at enforcement, and struggles to do even the bare minimum of tax return processing.
The new bill hopes to address this with a new appropriation of $78,911,000,000 for the agency which is meant to be spent . That $7.9 billion per year would be in addition to the regular IRS budget, which is currently about $12.6 billion. So that’s a pretty significant increase! (Though a future Republican Congress might well chop the yearly IRS budget appropriation to compensate for this.)
About 58% of this money is to be dedicated to tax enforcement. The agency hopes to use the money in part to go on a hiring spree to replace the 33,000 employees it has lost over and the nearly two-thirds of its current workforce that will be eligible to retire in the next six years. The government hopes that this new spending will more than “pay for itself” in that it will result in additional tax collection, such that the Congressional Budget Office projects that the result of this $80 billion in spending will be a return to the government of $124 billion in revenue above and beyond that.
The bill has a clause that says: “Nothing in this subsection [that gives more money to the IRS] is intended to increase taxes on any taxpayer with a taxable income below $400,000.” That is meant to provide cover for President Biden’s campaign promise along those lines, though I doubt it will be very meaningful from a legal standpoint. The additional enforcement revenue and personnel will most likely increase enforcement pressure on the rich and poor alike.