Tom Williams | Swimming pool | Reuters Senate Democrats on Sunday approved their climate, health and tax package, including nearly $80 billion in funding for the IRS. Part of President Joe Biden’s agenda, the Inflation Reduction Act provides $79.6 billion to the agency over the next 10 years. More than half the money is earmarked for enforcement, with the IRS aiming to collect more from high-net-worth corporations and tax evaders. The remainder of the funding is for operations, taxpayer services, technology, development of an instant free electronic records system and more. Collectively, these improvements are projected to generate $203.7 billion in revenue from 2022 to 2031, according to recent estimates from the Congressional Budget Office. More from Personal Finance: Does the Inflation Reduction Act violate Biden’s $400,000 tax pledge? 5 Things Borrowers Can Do While Waiting For Student Loan Forgiveness Is the economy in a recession? Top economists weigh in IRS audits have declined over the past decade, with the biggest drop among the wealthy, according to a May 2022 report from the Government Accountability Office. The check rate for Americans making $5 million or more fell to about 2 percent in 2019, compared to 16 percent in 2010, the report found. The agency said it is working to improve those numbers. But if the Inflation Reduction Act passes the House and is signed into law, it will take time to phase in the additional IRS funding, explained Garrett Watson, senior policy analyst at the Tax Foundation. The Congressional Budget Office estimates only about $3 billion of the $203.7 billion in 2023 revenue. “We didn’t get to this situation with the agency overnight, and it’s going to take more than overnight to get us going in the right direction,” he said.
IRS: We won’t tighten ‘control’ on the middle class
While supporters applaud the boosted IRS budget, opponents argue that increased enforcement could affect more than wealthy Americans, violating Biden’s $400,000 pledge.
“My colleagues claim that this massive funding boost will allow the IRS to go after millionaires, billionaires and wealthy so-called ‘tax cheats,’ but the reality is that a significant portion of the IRS funding will come from taxpayers with income under $400,000. Sen. Mike Crapo, R-Idaho, the ranking member of the Senate Finance Committee said in a statement.
IRS Commissioner Charles Rettig said the $80 billion in funding would not increase audits of households making less than $400,000 a year.
“The resources in the reconciliation package will bring us back to historical standards in challenging areas for the agency – large corporations and global high-net-worth taxpayers,” he wrote in a letter to the Senate.
“These resources are absolutely not about auditing small businesses or middle-income Americans,” he added.
More than two-thirds of registered voters support boosting the IRS budget to strengthen tax enforcement of high-income taxpayers, according to a 2021 poll by the University of Maryland.