It seems that Democrats and Republicans in Washington have finally found something they can agree on. Sadly, what they’ve agreed on is that the Internal Revenue Service is not intrusive enough in the lives of average Americans.
Last week, the House approved a $713 billion infrastructure plan that Democrats hope will be the first of several additional giant spending bills this year. Days before, the Senate reached a bipartisan deal on their own $1 trillion infrastructure bill. While the bill will focus primarily on funding infrastructure projects across the country, one allocation was a shock to many: Democrats and Republicans agreed to allocate an eye-popping $40 billion to the Internal Revenue Service. Seemingly, they have the explicit intent of turning the agency into even more of a nightmare for hardworking Americans.
A beefed-up IRS has been a key funding priority of the Biden Administration from day one. In theory, the expanded agency will be better equipped and staffed. This will enable it to more effectively collect taxes that, in the past, the agency has lacked the resources to pursue. By simply enforcing
the existing tax code more effectively, legislators hope to raise $100 billion in new tax revenue.
Last Month, Treasury Deputy Assistant Secretary Mark Mazur testified before Congress that, in 2019, the federal government collected $580 billion less than what they should have under the current code. This “tax gap,” he predicts, will balloon to over $7 trillion over the next decade. He ascribed this shortfall to the IRS’s limited budget which supposedly inhibits its ability to effectively target Americans. Over the last decade, the IRS budget has decreased by 20%. Whether or not greater government efficiency could make up for the budget shortfall was not discussed by Mazur.
In practice, this means a much more brutal tax season for millions of Americans. For small businesses, high earners, and young entrepreneurs, a standard audit is a scary and expensive proposition. Under the Democrats’ new funding plan (which some Republicans apparently agreed to) audits would rise dramatically, and tax collectors would be emboldened to aggressively target individuals they deem to be “ducking the code.” This could have the undesired effect of forcing high-earners and corporations to relocate overseas. Additionally, a major reason for the decline in IRS funding has to do with the agency’s recent history of whom they targeted for screening.
In 2013, it was revealed that the IRS, under the direction of then-Director of the IRS Exempt Organizations Division Lois Lerner, aggressively targeted and harassed conservative groups seeking tax-exempt status. Though some Democrat groups were also scrutinized, they were held to a much lower standard. When called before Congress, Lerner pleaded the Fifth and refused to resign from her position. In 2017, the IRS formally apologized to these conservative organizations and reached a settlement.
More recently, ProPublica, an activist-journalist website was able to secure “a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years.” Since then, they have slowly trickled out stories alleging tax fraud on the part of wealthy Americans. Most of these accusations have been questioned, if not outright refuted. The IRS has apparently not made any meaningful progress in identifying how the leak occurred or in prosecuting the leaker.
While it goes without saying that every American should pay what taxes they owe, the prospect of a “beefed-up” IRS has concerned many. The agency’s history of leaking information and political targeting already makes many Americans wary of the motives behind this plus-up. Additionally, the idea of vastly more audits is not one that is bound to be popular. An audit can be a ruinous expense for those who don’t consider themselves “tax wizards” or who lack the money to retain one.
The American people are not a cistern to be pumped by the federal government when it feels like spending more than it has. Nowhere in any of Democrats’ proposals is there a substantive measure to cut waste, fraud, or overspending in government. Without any such assurance that government will act responsibly or effectively in the name of the taxpayer, why should the taxpayer feel inclined to give more of their hard–earned dollars? When it comes to the money Americans earn, the onus is on the federal government to prove why it needs to take, not on the individual to prove why he or she needs to keep. Under this new IRS, that presumption may just be reversed.