$79B for IRS in budget reconciliation bill would ramp up tax code enforcement

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Republicans have argued that an expansion of that magnitude would be too aggressive.

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The Democrat-backed $3.5 trillion budget reconciliation bill would provide about $79 billion in new funding for the Internal Revenue Service — a huge investment that President Biden and others argue would close the “tax gap,” or the amount of disorganized revenue. and raise funds for the White House’s comprehensive spending plan.

According to the text of the bill, from 2022 to 2031, the $78.94 billion in funding will allow the IRS to strengthen tax enforcement initiatives, conduct more audits, and modernize its technology. An additional $410 million has been earmarked for oversight of the tax agency, including to protect “taxpayer privacy” and to see that “no undue burdens are placed on small businesses.”

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The plan has received mixed reactions on Capitol Hill. While Democrats have supported it, Republicans have argued that an expansion of that magnitude would be too aggressive and could harm businesses. GOP lawmakers have universally opposed the $3.5 trillion spending plan.

“In light of recent proposals to broadly expand the IRS with unprecedented amounts of mandatory funding, and continued abuses by the IRS of taxpayer rights and privacy, protecting any additional IRS funding and monitoring of Americans’ personal finances from abuse.” Mike Crapo, R-Idaho, said earlier this month.

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The IRS’s expansion was one of several measures left over from the bipartisan $1 trillion infrastructure package, which focused on physical projects, and was later added to the $3.5 trillion spending bill. A Senate vote on a comprehensive $3.5 trillion bill, which includes massive social programs and climate-friendly economic initiatives, is expected later this week.

President Biden’s push to expand the IRS coincides with his call for higher taxes on corporations and the wealthiest Americans. The president has argued that the tax agency is short of staff and will require an overhaul to successfully implement changes to the tax code.

Biden last week referenced his plans for the IRS, while expressing support for a plan to annually tax billionaires’ unrealized investment gains.

“I know some people don’t like it,” Biden said. “That’s why we have to re-hire some IRS agents. And not to try to make people pay something they don’t owe, just say, ‘Hey, move on like everyone else.’”

The anticipated impact of the IRS expansion is also up for debate. The nonpartisan Congressional Budget Office estimated that an expanded IRS would generate an additional $200 billion in revenue over the next decade, or $120 billion in net income given the cost of the expansion.

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In May, the Treasury Office of Tax Analysis estimated that the IRS expansion, along with tighter tax rules and penalties for tax evasion, could raise $700 billion in additional revenue over the same period.


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