Republicans heading into November’s midterm elections are talking a big game on the IRS, promising to take back the $80 billion in agency funding provided by Democrats and scuttle plans to hire what the GOP has characterized as an army of new auditors.
The strategy could pay political dividends at the polls in November if the GOP is correct that the calls will motivate their base, but it will also raise expectations that Republicans will follow through on their vows.
House GOP Leader Kevin McCarthy (Calif.) says the first bill a new Republican majority will pass if it wins control of the House will be one repealing the new IRS agents.
Yet with President Biden still in office and Republicans at best having a slim majority in the Senate, such a House bill is unlikely to become law.
Democrats already are promising to go to the mat to protect the hard-won funding, which was included in the sweeping tax, health care and climate change bill signed into law in August.
They argue the new IRS funding is necessary to make sure the agency can conduct audits on wealthy tax cheats and that middle-class Americans are unlikely to be audited. Instead, they say the middle class would be hurt by the GOP’s plans because it might delay their receiving tax refund checks.
“Republicans are openly vowing that their number one priority if they retake power is to delay Americans’ tax refund checks and make it even easier for millionaires to cheat on their taxes,” Rep. Bill Pascrell (D-N.J.) said in a statement to The Hill. “After years of deliberate Republican sabotage of the IRS, the Inflation Reduction Act will finally give IRS resources to process returns faster, answer the phone, and crack down on big business tax cheats.”
Asked about procedural obstacles to repealing the IRS funding, House Ways and Means Committee Republican leader Kevin Brady (R-Texas) said his party would be able to rescind the funding.
“Next Congress, the Republican majority will use its congressional authority to ensure the IRS is held accountable and rescind the new funding so that the agency focuses on customer service. Democrats will be in no position to defend a supercharged agency threatening audits on the middle class,” Brady said in a statement to The Hill.
Republicans scoff at Democratic arguments that the infusion of money for the IRS won’t lead to audits of small businesses and the middle class, while expressing doubt it will help with speedy tax refunds.
“I work every day with people who still haven’t received their tax returns,” Rep. Claudia Tenney (R-N.Y.) said Thursday on the Fox Business Network. “And now we’re going to put a tax police out — 87,000 — who you know, they’re going to go after the middle- and lower-income taxpayers.”
Some Republicans have used unusually harsh rhetoric to describe the IRS.
“Are they going to have a strike force that goes in with AK-15s already loaded, ready to shoot some small-business person in Iowa with these, because I think they’re going after middle-class and small-business people,” Sen. Chuck Grassley (R-Iowa), a former chairman of the Finance Committee, said of the new funding during an August appearance on Fox News.
Such statements about armed IRS agents have been debunked by numerous fact-checkers and tax experts, but have not discouraged ramped-up political messaging by Republicans.
The figure of 87,000 new IRS auditors comes from last year’s Treasury Department compliance report, which found that $80 billion could pay for 86,852 new IRS hires. But only a portion of those would be new auditors, tax experts say. The rest would be customer service representatives, computer scientists and other kinds of agency workers.
Moreover, due to an aging workforce, the IRS estimates it will need to hire 52,000 employees over the next six year to maintain current levels, which are more than 10 percent lower than they were a decade ago, according to IRS data.
The IRS has yet to break down exactly how it’s going to spend the $80 billion, which will stretch over the next decade and grow the agency’s budget from roughly $12 billion a year to $20 billion a year. But the new law blocks it out into major chunks, including $45 billion for additional audits, $25 billion for improving basic operations, $3 billion for taxpayer services such as answering phone calls and nearly $5 billion for new technology.
Treasury Secretary Janet Yellen told the IRS the new money for enforcement should be used specifically to go after corporations and wealthier people, whose audit rates in recent years have declined faster relative to other income classes.
“These investments will not result in households earning $400,000 per year or less or small businesses seeing an increase in the chances that they are audited relative to historical levels,” Yellen wrote in an August memo to IRS Commissioner Charles Rettig. “Instead, they will allow the IRS to work to end the two-tiered tax system, where most Americans pay what they owe, but those at the top of the distribution often do not.”
The decline in tax enforcement has vastly increased the estimated revenue lost each year to underpayments — the IRS puts the figure as high as $1 trillion — increasing a reliance on deficit spending that Republicans have long decried.
Republicans have also been fierce critics of the IRS’s operational performance — criticisms that grew only louder during the COVID-19 pandemic when the backlog of tax returns increased significantly. Much of the new agency funding is designed to eliminate that backlog, streamline the processing of tax returns and reduce wait times for taxpayers calling into IRS information centers — efficiencies that would be undermined by slashing the agency budget.
Earlier this year, Republicans on the House’s chief tax-writing Way and Means Committee called attention to a letter to Yellen from “166 bipartisan Members of Congress [expressing] concern about the backlog” and pointing out “the IRS’s inability to do its job.”
The “IRS is in crisis with a massive backlog of unprocessed tax returns, unanswered phone calls, and bureaucratic delays,” they said.
Democrats argue the GOP runs counter to claims that they represent the party of law and order.
“It seems to me that Republicans just don’t want people to pay taxes, even if they’re owed,” Rep. John Yarmuth (D-Ky.), head of the House Budget Committee, said as the Inflation Reduction Act was passed in August.
“We know there are hundreds of billions of dollars of owed but not paid taxes in this country every year. And this is an attempt to try and recover some of that money that is owed and is not being paid by taxpayers who are, in many cases, cheating.”
The fact that the IRS bill is the first one promised by a House GOP majority, and that it is a central part of the party’s midterm messaging, shows Republicans think the theme is a pure political winner.
Yet there are polls that suggest the IRS isn’t the public demon suggested by the GOP rhetoric.
A 2020 Pew Research poll found that 65 percent of Americans hold a favorable view of the agency, while 29 percent have an unfavorable view.
Updated 2:59 p.m.