WASHINGTON — IRS’s plea for more congressional funding — made by leader after leader over the years — finally paid off this summer, when Democrats approved an $80 billion boost for the agency in their flagship climate and health law have stuck.
Bolstered by a new flow of funding, the IRS plans to clear a massive backlog of unprocessed tax returns, improve technology that’s decades out of date, and, yes, hire more accountants.
But as GOP candidates across the country are making clear, the battle for IRS funding is only just beginning. They make attacks on a larger IRS a central part of their campaign to voters and warn that Democratic legislation will fund an army of auditors who will harass, rather than help, middle-class taxpayers.
“If you walk past them, they’ll come — after you,” reads an ad, which runs in an Iowa House race and mimics a scene from the movie “Field of Dreams.” Instead of baseball players emerging from a cornfield, they are IRS agents dressed in black.
The GOP’s warnings are generally alarming 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 retire around 50,000 IRS employees in the coming years. Others become customer service agents, taking calls from taxpayers.
Some of the IRS employees join the ranks of sophisticated audit teams that spend thousands of hours pondering complicated returns, but the Biden administration has also clarified that small businesses or households making $400,000 or less a year earn, will see no increase in their exam chances.
“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 Department adviser on tax policy and implementation.
But campaign politics can become politics. With GOP ads against the IRS cover campaign in the air, the agency’s funding appears far from secure and could be jeopardized once the next Congress is sworn in.
Minority Speaker in the House of Representatives Kevin McCarthy has promised that if Republicans take the majority, passing a bill removing new IRS funding will be their first act.
While such a bill has little chance of becoming law — President Joe Biden will retain the veto power even if the GOP gains control of Congress — Republicans are unlikely to abandon the issue. Your biggest impact on IRS funding will come when Congress passes must-pass spending legislation to fund government agencies or avoid a government default on its debt.
Douglas Holtz-Eakin, 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 to demand less IRS funding.
“If it was important enough to silence the government about this, the 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, largely skipping the IRS fight.
Still, some advocates of additional IRS funding are concerned about Democrats’ response to the GOP ads, or more specifically, the lack thereof. Instead, Democratic groups and candidates largely focus their campaign ads on non-economic issues such as abortion rights.
“There’s a cricket, that’s the word, a cricket response from Democrats on this issue,” said Frank Clemente, executive director of Americans for Tax Fairness, a liberal-minded advocacy group.
“This is a story about messaging,” Clemente said. “…candidates need to talk about it. You have to advertise on it. You need to tell people how they will benefit, not only will they personally benefit from an improved IRS, but how rich and corporate tax dodgers will 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 has stressed that resources would be focused on improving customer service and oversight at the higher end of the income spectrum.
Among other things, the IRS says its new funding will be dedicated to fixing long-standing customer service issues — like answering calls. The problem is so pervasive that a bipartisan group of lawmakers wrote to the IRS last November to complain that calls are only being answered 9% of the time during the 2021 filing season.
The IRS is also tasked with considering how to move forward with an expanded free filing system for taxpayers.
Nina Olson, a former head of the Office of the Taxpayer Advocate, said if funds are cut, taxpayers who were hoping for better customer service will be hit the hardest.
“If you don’t want the IRS to handle 85% of incoming calls, then cut its funding — if you want the IRS to keep having tech from the 1960s, by all means cut its funding,” Olson said.
Democrats provided a funding push to the IRS to fund other health and climate priorities, such as: B. Helping millions pay their health insurance premiums over the next three years and capping insulin costs to no more than $35 per month for Medicare beneficiaries.
Of the additional $80 billion in IRS funding, the Legislature allocated $46 billion for tax law enforcement. The remainder goes to other activities such as taxpayer services, operational support and business system updates.
Additional funding for the agency has been politically controversial since 2013, when it was found that the IRS used improper criteria to screen tea party groups and other organizations seeking tax-exempt status under the Obama administration.
In the years that followed, the IRS was mostly on the losing side of Congressional funding battles, even as a later 2017 report noted that both 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 declined by more than 15% over the past decade, adjusting for inflation, and that the number of full-time employees was tight at 79,000 last fiscal year to 1974 levels.
Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, said that if Republicans manage to cut funding to the IRS, “it will seriously damage a fundamental function of government,” she said, “which is really troubling.” .
“The reality is that government through the IRS plays a critical role in the lives of Americans every day,” she said. “Pretending that role doesn’t exist to gain political points is destructive.”