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After a protracted and pointless catfight, Republicans elected Rep. Kevin McCarthy (R-Calif.) Speaker of the United States House of Representatives. McCarthy immediately announced that the first order of business in the House would be repeal the vast majority of funds (in the Inflation Reduction Act of 2022) for the Internal Revenue Service: “You see,” he said, “we believe government should be able to help you, not go after you.” On Jan. 9, the House approved the repeal. The legislation is almost certain to die in the U.S. Senate.
Gutting the IRS has been a high priority of Republicans for quite some time. Influenced, perhaps, by the ubiquity of vicious IRS jokes, they seem to have concluded that attacking the agency with misleading claims is a no-lose proposition.
“I work every day with people who still haven’t received their tax returns,” said Rep. Claudia Tenney (R-N.Y.) “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.” Sen. Chuck Grassley (R-Iowa) wondered whether the IRS is “going to have a strike force that goes in with AK-15s already loaded, ready to shoot some small business person in Iowa?” Sen. Rick Scott (R-Fla.) warned job seekers not to apply to the IRS because “you not only need to audit and investigate your fellow hardworking Americans, your neighbors and friends, you need to be ready and, to use the IRS’s words, willing, to kill them.”
That said, the case for giving the IRS the resources it needs to administer a $4.1 trillion system for individuals, businesses and tax exempt organizations that file 263 million returns, is compelling, as a constructive public policy and maybe even good politics.
During the last decade, the inflation-adjusted budget of the IRS and the size of its workforce fell by about 20 percent. In the mid-1990s, the IRS had 15,540 revenue agents who conducted audits. It now has 8,200, a number smaller than at any time since World War II, when returns were far less complicated. Between 2010 and 2018, the percentage of audited returns declined by 45 percent (61 percent for incomes over $1 million; 64 percent for incomes over $10 million; and 50 percent for corporations with assets over $20 billion). The backlog of unprocessed returns increased from 7.4 million in 2019 to 35.8 million in 2021. Customer service representatives answered 59 percent of calls in 2019 and 19 percent in 2021.
For ordinary wage and salary income, the U.S. Department of Treasury reports, compliance is about 99 percent. For income sources that accrue “disproportionately” to high earners, about 55 percent of filers consciously or unintentionally misreport.
The tax compliance gap in the United States — taxes owed to taxes paid — now exceeds $600 billion, and it is almost entirely the province of the rich.
Ironically, given Republicans’ allegations that improved staffing would “sic” more agents on the common man, an understaffed IRS has recently relied on inexpensive automated audits of taxpayers earning less than $75,000, who make mistakes, underpay by small amounts, and cannot afford to fight back.
Acknowledging that large corporate and global high-net-worth taxpayers are “areas of challenge,” Charles Rettig, the Trump-appointed IRS Commissioner, declared that additional resources would not increase “audit scrutiny on small business and middle income Americans.”
Since 2010, moreover, the number of high-income non-filers of taxes has risen by about 50 percent, many of them not investigated due to resource constraints. Rettig recently explained that his agency did not conduct a mandatory audit of President Trump’s taxes because the IRS lacked experts capable of assessing his complicated filings and was “simply outgunned.”
Out of 81,600 IRS personnel, as Sens. Grassley and Scott ought to know, only about 2,100 carry firearms. These special agents track down drug dealers, human traffickers, and terrorists.
And so, one might assume that self-proclaimed champions of fiscal responsibility and balanced budgets would applaud passage of legislation enabling the IRS over the next decade to replace departing and retiring staff; hire more tax compliance experts; modernize or replace antiquated technology; monitor digital assts, including cryptocurrency; fund ongoing operations (for rent, facilities, printing, and postage); increase security (in the face of 1.4 billion cyberattacks each year); enhance prefiling and filing assistance to taxpayers; and facilitate online submissions.
Moreover, the Treasury Department estimates, conservatively, that every dollar spent on enforcement would return at least four dollars in revenue — and projects that payments to the federal government would increase by about $700 billion by 2031, and $1.6 trillion in the following decade, most of it coming from very wealthy individuals and corporations.
Apparently, however, Republican politicians have shrugged off polls indicating that 65 percent of Americans have a favorable view of the IRS and that 76 percent (77 percent of Republicans) are “not concerned” about being personally audited.
They continue to demonize the IRS with claims unsullied by fact.
The “Never Kevins,” the “Only Kevins,” the vanishingly small number of moderate Republicans in the House of Representatives, and the “Sing-Along-With-Mitch” GOP Senators — all of them, it appears, remain tethered to two — and only two — increasingly unpopular constituencies: a virulently anti-government MAGA base and lobbyists and donors with deep pockets.
Glenn C. Altschuler is the Thomas and Dorothy Litwin Professor of American Studies at Cornell University. He is the co-author (with Stuart Blumin) of “Rude Republic: Americans and Their Politics in the Nineteenth Century.”
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January 10, 2023 at 09:00PM
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Republicans: Attacking the IRS is a no-lose proposition, right? - The Hill
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