Republicans Get Their IRS Cuts; Democrats Say They Expect Little Near-Term Impact
WASHINGTON (AP) — House Republicans are seeking to make good on their campaign promise to rein in the IRS with cutbacks built into the debt ceiling and budget cuts package moving through Congress.
The bill rescinds $1.4 billion given to federal tax collectors in the Democrats’ health and energy package that was approved last year on party-line votes. The White House says the debt deal also includes a separate agreement to take $20 billion from the IRS over the next two years and divert those funds to other nondefense programs.
Democrats expended a lot of political capital to get the IRS more money last year. They faced an onslaught of campaign ads, many of them misleading, about the expected hiring of 87,000 “new agents” to target low- and middle-class Americans.
Now, Biden administration officials are offering assurances that the spending cuts secured by Republican negotiators will have minimal impact on the agency’s operations over the next few years.
The agency is on course to still get nearly three-quarters of the $80 billion boost that Congress approved for the agency last year. And the agency has the flexibility to spend some of that money sooner than planned, officials stressed.
“The IRS has the resources it needs in the near term to improve customer service and go after wealthy and corporate tax evaders,” tweeted Deputy Treasury Secretary Wally Adeyemo.
But for looking to win support for the bill, the spending cuts for the IRS represent a critical selling point. The first bill that House Republicans passed this year would have rescinded most of the extra dollars Congress had approved for the IRS the year before. The bill has gone nowhere in the Democratic-controlled Senate.
As for the debt deal, “what this does is put the IRS at the forefront. We have a down payment in this bill of $1.4 billion to rescind their enforcement hiring this fiscal year. In the appropriations process, we’ll come back for more,” said Rep. Patrick McHenry, R-N.C., one of the lead GOP negotiators.
In April, agency leaders released details on how the agency would use the $80 billion infusion for improved operations, pledging to invest in new technology, hire more customer service representatives and expand its ability to audit high-wealth taxpayers. The plan lays out the specifics of how the IRS would allocate the $80 billion through fiscal year 2031.
Now, with some of that money clawed back, there is a question about what programs may take a back seat. Treasury officials say their plan to develop an online free file tax return system, which is in its pilot development stage, for instance, will not be impacted by the cuts.
But some analysts are skeptical about the Biden administration’s assurances. Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center, said “The loss of the funds has to be a setback” for the agency. “With less money and resources, everything will slow down, it just may take a while longer” to develop certain promised programs, he said. “I don’t know if this will come out of service, enforcement, technology, or otherwise.”
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