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January 6, 2023

GOP Seeks to Rein in IRS

The nation’s tax-collection agency is bigger, stronger, and poised to make a lot more Americans miserable.

Whenever a new Congress convenes, attention typically turns to the agenda of the party taking power. But right now, Republican infighting over the next House speaker is keeping the GOP from getting down to business.

When the dust settles on Capitol Hill, though, one of the key orders of Republican business will be short-circuiting President Joe Biden’s plan to unleash 87,000 new IRS employees on the American people.

The IRS expansion is part of Biden’s ridiculously named Inflation Reduction Act, which doubled the IRS budget to $79 billion over the next decade. The IRS wants to tackle a backlog of tax filings and lost revenue — as if Washington needs more money than the $1.7 trillion in omnibus Monopoly money it grabbed just before high-tailing it out of town for the holidays.

Doubling the IRS budget? What could go wrong? Never fear, though: Defenders of the new plan promise that only the very wealthy will have government auditors knocking on their doors.

According to The Washington Times: “[Treasury Secretary Janet] Yellen has ordered the IRS to ensure that audit rates on households making less than $400,000 do not rise and said the enforcement is supposed to be targeted at the wealthy. Top IRS officials estimated that $574 billion in legally owed taxes went uncollected in 2019 because of a lack of agency manpower. The number may have shot up since then. The IRS is already at a disadvantage trying to collect that money.”

There are a couple of problems with this. One is that the IRS is having trouble finding competent staff. Another is that those in the middle class might find themselves in the crosshairs of the expanded IRS, even though they’re making far less than Biden’s totally arbitrary $400,000 threshold.

“Democrats,” reports the Wall Street Journal editorial board, “spent last week swearing that only high earners would be squeezed under their plan to beef up the Internal Revenue Service. It took only a few days for the Congressional Budget Office to put that narrative to rest. A quick analysis from the budget scorer confirms that the audit expansion will ensnare the middle class.”

The editors continue: “The agency found that increased scrutiny on filers earning less than $400,000 would account for $20 billion over 10 years, out of a total of about $204 billion that Democrats hope to collect through a bigger, badder IRS. In other words, the IRS expansion as it’s currently designed could collect billions in revenue from new middle-class audits.”

Going after tax cheats is understandable, even noble, but expanded IRS audits will randomly target working-class Americans who can’t afford to fight the IRS in court. Instead, they’ll hand over a check even if they don’t think they’re in the wrong. The House Ways and Means Committee revealed last summer that as much as 90% of the money raised from underreported income would come from Americans earning less than $200,000 per year.

At least one former employee-turned-whistleblower fired by the IRS for making allegations against the agency’s practices seems to agree, suggesting that the new plan will put middle-class taxpayers under the microscope. As former Internal Revenue Service lawyer William Henck put it: “There will be considerable incentive to basically to shake down taxpayers, and the advantage the IRS has is they have basically unlimited resources and no accountability, whereas a taxpayer has to weigh the cost of accountants, tax lawyers — fighting something in tax court.” Henck also claims the IRS went after senior citizens because they were more likely to settle with the agency.

Before the holidays, then-Minority Leader Kevin McCarthy promised that on Day One the new Republican-led House would repeal some of the proposed budget increase for the IRS and cancel the plan to hire those 87,000 new employees.

Now we just need Republicans to get their act together, elect a speaker, and get down to business. Protecting decent, hard-working taxpayers from random IRS audits should be one of their top priorities.

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