AMAC Exclusive – By Neil Banerji
One year after passage of the misleadingly titled “Inflation Reduction Act” (IRA), the bill’s $80 billion in additional funding for the IRS, followed by policy changes seemingly aimed at squeezing more money out of middle- and low-income earners, have continued to be losing issues with voters.
After retaking the House last November, Republicans’ first vote this Congress was a measure to claw back more than 90 percent of the money that Democrats had allocated to the IRS in the IRA. Although the GOP bill was doomed in the Democrat controlled Senate, public polling at the time showed that 46 percent of all voters (including 37 percent of Democrats) supported the move, compared to just 36 percent who oppose it.
Elected Democrats have continued to take flak over the $80 billion boost for the IRS, in particular after it was revealed that the money would be used to hire 87,000 new IRS agents. Although Democrats and the mainstream media have insisted that the agency’s “enhanced enforcement” power would only be used to target “wealthy tax cheats,” data continues to show that the burden of IRS audits disproportionately falls on low income families.
In news that seemed to confirm Democrats weren’t really interested in using their new army of auditors to go after rich crooks, the IRS announced a new plan in February to crack down on tips earned by service industry workers.
The new policy, officially titled the “Service Industry Tip Compliance Agreement,” or SITCA, was billed by the IRS as an effort to “improve tip reporting compliance.” However, Republicans have blasted it as an effort by the IRS to grab as much money as possible from workers in typically lower-paying industries who don’t have the money to fight audits.
SITCA replaces three prior compliance programs on workers’ tips dating back to the 1990s and would allow the IRS to revamp the way that businesses report their workers’ tips to the agency, foreshadowing a much broader scheme to crack down on unreported tipping.
With its much deeper intrusion into the highly sensitive topic of workers’ compensation, SITCA would usher in a new era of government oversight excessive even by the standards of an agency as bloated and heavy-handed as the IRS.
The plan’s details cover a wide array of regulatory mechanisms through which the IRS would extract more taxes from hard-working Americans. For example, it mandates “the monitoring of employer compliance based on actual annual tip revenue and charge tip data from an employer’s point-of-sale system” – in other words, requiring employers to keep track of their employees’ tips and then hand that information over to the IRS.
In an ominous sign of its future intentions, the IRS also stated that it was exploring further “opportunities” in relation to the gaming industry, which is currently regulated by a different set of rules.
Republican Senator Ted Cruz, who had previously called for the IRS to be abolished, has labeled SITCA as “next-level cruelty.”
“Those 87,000 new IRS agents that you were promised would only target the rich… They’re coming after waitresses’ tips now,” stated Mike Palicz, the federal affairs manager for Americans for Tax Reform.
Characterizing SITCA as “Biden’s radical war on working class,” Republican Congressman and Ways and Committee Chairman Jason Smith stated, “It’s clear that the White House is doubling down on crazy and prioritizing going after hardworking middle-class employees.”
Although SITCA has faded from the headlines since the IRS announcement in February, the proposal, along with other unpopular Democrat tax policies, could rise to the fore again heading into election season next year. By passing a bill revoking the $80 billion in IRS funding, Republicans have drawn a clear contrast with Democrats that will play well in campaign ads and on the debate stage.
One state where SITCA could prove particularly problematic for Democrats is Nevada, where the concentration of service workers is more than double the national average. Incumbent Democrat Senator Jackie Rosen, who voted in favor of the IRA, faces a tough re-election battle there next year, and both parties’ presidential nominee will be competing hard for the state. If Republicans can tie Democrats to a scheme to siphon more money away from tipped workers, it could play a significant role in determining the outcome of the election.
SITCA is also an easy way for Republicans to expose Democrat dishonesty on other tax issues. While Biden has repeatedly stated that he won’t raise taxes on Americans making more than $400,000, policies like SITCA show that Democrats still fully intend to take more money from the pockets of middle- and low-income earners, even if there aren’t technically any new taxes. That type of deception won’t sit well with voters, even those who aren’t directly affected by SITCA.
Public polling already shows that most Americans associate “Bidenomics” with inflation and higher taxes. If they associate it with a bigger and more oppressive IRS as well, Biden and Democrats’ 2024 chances could be in serious jeopardy.
Neil Banerji is a proud Las Vegas resident and former student at the University of Oxford. In his spare time, he enjoys reading Winston Churchill and Edmund Burke.
