President Joe Biden’s budget proposal includes funding increases for several government agencies, including the Internal Revenue Service (IRS). Biden proposes to give the IRS $13.2 billion next year, an increase of $1.2 billion, or 10.4 percent, over this year’s appropriation.
The IRS collects taxes and enforces tax policy in the United States. The funding increase is intended to intensify enforcement efforts. In a statement, Treasury Secretary Janet Yellen said the funding request would make things “fairer.”
“It injects capital into communities where capital is usually hard to come by,” Yellen said. “It will make paying taxes a more seamless process for millions of Americans. And it makes sure that corporations actually pay what they owe.”
The plan is to use the funds to help reduce tax evasion, targeting high earners and corporations. The Biden budget would pay for 87,000 new IRS agents, Politico reports.
The Biden administration projects the new spending will bring in an additional $700 billion in tax revenue over ten years. IRS Commissioner Chuck Rettig said the expanded staff could increase collections by as much as $1 trillion.
The Congressional Budget Office forecasts a much smaller return on the funding increase, projecting a $40 billion increase in the IRS budget would yield $103 billion in additional revenue, a net of $63 billion.
John Koskinen, head of the IRS under President Barack Obama, told The New York Times the funding increase is unnecessarily generous.
“I’m not sure you’d be able to efficiently use that much money,” Koskinen said. “That’s a lot of money.”
Former Democrat presidential aspirant Sen. Elizabeth Warren (D-MA) strongly supports increasing the IRS budget to target wealthy Americans and to fix presumed racial disparities in enforcement, among other things.
“For too long, the wealthiest Americans and big corporations have been able to use lawyers, accountants, and lobbyists to avoid paying their fair share, and budget cuts have hollowed out the IRS so it doesn’t have the resources to go after wealthy tax cheats,” Warren said in a press release.
Garrett Watson, a senior policy analyst at the Tax Foundation, says the plan would require banks to provide more information about their customers’ accounts to help the IRS with enforcement, which won’t cost the government much. The complexity of the tax code is a major problem, however, which the funding increase doesn’t address, Watson says.
“Some of this gap is due to evasion, but a lot is due to misunderstanding of the tax code because it’s so complicated, especially for independent contractors,” Watson told MarketWatch. “Simplifying the code would be complimentary to the effort—it lets the IRS focus on the people who are deliberately evading taxes.”
There could be political blowback if the enforcement increase hits regular people hard instead of finding the big tax cheaters Biden says he wants to catch, writes John McCormack for National Review.
“The politics of increasing the IRS’s budget by two-thirds could be dicey if the upper-middle-class suburbanites who swung toward the Democratic Party fear they’re going to be harassed by the IRS,” McCormack writes.
