By KEVIN FREKING and FATIMA HUSSEIN, Associated Press
WASHINGTON (AP) — The IRS’ calls for more funding from Congress — made over the years by one leader after another — finally paid off this summer when Democrats added $80 billion to the agency in their landmark climate and health care law.
Armed with a new stream of funding, the IRS plans to eliminate a massive backlog of unprocessed tax returns, upgrade decades-old outdated technology and, yes, hire more auditors.
But, as GOP candidates across the country make clear, the battle over IRS funding has only just begun. They are making attacks on a larger IRS a central part of their midterm campaign pitch to voters, warning that Democratic legislation will fund an army of auditors who will harass middle-class taxpayers rather than help them.
“If you pull it off, they’ll come – after you,” says a commercial in an Iowa House run that parodies a scene from the movie “Field of Dreams.” Instead of baseball players emerging from a cornfield, they are IRS agents in black suits.
GOP warnings are generally alarmist and misleading. The agency isn’t hiring an army of 87,000 “new agents” to target lower- and middle-class Americans. Many hires will be used to replace some 50,000 retiring IRS employees in the coming years. Others will become customer service representatives answering telephone calls from taxpayers.
Some of the IRS hires will be added to the ranks of sophisticated audit teams that spend thousands of hours poring over complicated returns, but the Biden administration has also made it clear that small businesses or households earning $400 $000 per year or less will not see an increase in their chances of being audited.
“The purpose of the funding is to modernize a severely underfunded agency to provide the American people with the customer service they deserve,” said Natasha Sarin, Treasury Advisor for Tax Policy and Enforcement.
But campaign politics has a way of becoming politics. With GOP ads against the airwaves of the IRS cover campaign, agency funding looks far from secure and could be in jeopardy as soon as the next Congress is sworn in.
House Minority Leader Kevin McCarthy, the speaker-in-training, has promised that if Republicans win a majority, passing a bill repealing new IRS funding will be their first piece of legislation.
While such a bill is unlikely to become law — President Joe Biden will retain the veto even if the GOP takes control of Congress — Republicans are unlikely to drop the issue. Their greatest leverage over IRS funding will come when Congress passes must-have spending bills to fund government agencies or to avoid a government default on its debt.
Douglas Holtz-Eakin, an economist and president of the American Action Forum, a center-right think tank, doubts lawmakers will go so far as to force a government shutdown in a demand for less funding from the IRS.
“If it was big enough to shut down government on this, government would be shut down,” Holtz-Eakin said. He noted that lawmakers passed a short-term measure last month to fund the government through December and largely ignored the fight against the IRS.
Still, some proponents of additional IRS funding are concerned about the Democratic response to GOP ads, or to be more precise, the lack thereof. Instead, Democratic groups and candidates largely focus their campaign ads on non-economic issues such as abortion rights.
“There are crickets, that’s exactly the word, a cricket response from Democrats on this issue,” said Frank Clemente, executive director of Americans for Tax Fairness, a liberal-leaning advocacy group.
“It’s a messaging thing,” Clemente said. “…Candidates need to talk about it. They have to run ads on it. They need to tell people how they are going to benefit, not just personally from an improved IRS, but how the wealthy and tax cheats are going to have to pay the taxes they owe.
The IRS is still working out the details of how it would spend the additional $80 billion, but it stressed that the resources would be devoted to improving customer service and top-down scrutiny. income.
Among other things, the IRS says its new funding will go toward solving long-standing customer service issues, like answering the phone. The problem is so widespread that a bipartisan group of lawmakers wrote to the IRS last November complaining that phone calls were answered only 9% of the time during the 2021 filing season.
The IRS will also be tasked with figuring out how to move forward with an expanded system of free files for taxpayers.
Nina Olson, former head of the Office of the Taxpayer Advocate, said if funds were cut, taxpayers who hoped for better customer service would be hit hardest.
“If you don’t want the IRS to handle 85% of incoming calls, then cut funding — if you want the IRS to continue to have technology that comes from the 1960s, definitely cut their funding,” said Olson.
Democrats provided the increased funding to the IRS to help pay for other health and climate priorities, like helping millions pay their health insurance premiums over the next three years and capping the costs of insulin at no more than $35 per month for Medicare beneficiaries.
Of the additional $80 billion in IRS funding, the legislation allocated $46 billion to tax enforcement. The rest goes to other activities such as taxpayer services, operations support and updating business systems.
The agency’s additional funding has been politically contentious since 2013, when the IRS under the Obama administration was found to have used inappropriate criteria to review tea groups and other organizations applying for tax-exempt status.
In the years that followed, the IRS was mostly the loser in Congressional funding fights, though a later 2017 report found that conservative and liberal groups were singled out for scrutiny.
In April, IRS Commissioner Charles Rettig told members of the Senate Finance Committee that the agency’s budget had shrunk more than 15% over the past decade when adjusting for inflation. and that the number of full-time employees at 79,000 in the last fiscal year was close. at 1974 levels.
Vanessa Williamson, senior fellow at the Urban-Brookings Tax Policy Center, said if Republicans succeed in cutting funding for the IRS, “it will seriously harm a fundamental function of government,” she said, “that which is really disturbing.”
“The reality is that the government, through the IRS, plays a crucial role in the lives of Americans every day,” she said. “Pretending that role doesn’t exist to score political points is destructive.”
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