Democrats Abandon Bank Account Snooping Plan, Boost I.R.S. Budget

The dust is starting to settle over the budget/infrastructure battle in D.C. The good news is that the anticipated proposal to force banks to report information about more of their customers’ accounts to the IRS seems to have been abandoned. Centrist Democrat Senator Joe Manchin decided at the last minute to strongly oppose that idea, which more-or-less doomed it, given the Democrats’ razor-thin majority in the Senate. (Once the writing was on the wall, 21 Democrats in the House of Representatives also opposed the measure, which is a larger number than the Democratic majority there.)

However, the budget does include a planned $44 billion increase (over the next decade) in the IRS budget. That’s about half of what the Democrats were hoping for, but it will reverse the budget cuts of the past decade that have helped to make the IRS the pathetic, flailing, gutted bureaucracy we know and love.

The Democrats hope (or claim to believe) that the increase in IRS funding will lead to a big boost in tax collection. I think they’ll probably be disappointed. I expect a lot of the money will end up spent on deferred maintenance (e.g. “A 60-year-old IRS IT system won’t finish modernizing until ) and on hiring and training new workers to replace rapidly-retiring agency veterans, in a challenging labor market. The IRS has a lot more on its plate than it did ten years ago, too. It has to paddle harder just to stay in place.

The budget and infrastructure bills aren’t final final yet. Things could still change a bit. But the paint is beginning to dry.