One key aspect of the legislation known as the Inflation Reduction Act is its $80 billion in proposed new Internal Revenue Service funding over a ten-year period. There have been a number of excellent mainstream media summaries of the funding, including Laura Saunders’ WSJ article What $80 Billion More for the IRS Means for Your Taxes[$] and Alan Rappeport’s NYT article Yellen Directs I.R.S. to Embark on $80 Billion Overhaul Plan[$]
There are serious issues surrounding how the IRS prioritizes and spends the significant increase in funding. We will consider some of those issues in the upcoming months and years.
While we try to avoid being partisan on this site, this past weekend I wrote an Op-Ed for NBC Think about the potentially dangerous rhetoric that politicians have been using to describe the funding. As I discuss, stirring the pot and scaring Americans about the IRS undermines trust and is potentially dangerous.
I am not naïve enough to think that the IRS at times never impinges on taxpayer’s rights. And the IRS at times has not helped itself, with taxpayers and practitioners frustrated at delays and unanswered phones.
A better resourced, more active and engaged IRS will hopefully center its actions on principles of sound administration. If it does not, people who care will take action, by writing articles and essays, filing amicus briefs and at times joining in litigation.
And we should expect Congress and other institutional actors to provide meaningful oversight. What is not helpful is politicians and some in the media using the legislation to scare Americans into thinking that the funding will lead to an army of armed IRS agents threatening people’s basic liberties.
About Leslie Book
The absurdity of the claims being made is astounding because of how many people buy into the misleading, and in some cases false, alarms. For example, in Fear Mongering, Tax Style (https://mauledagain.blogspot.com/2022/08/#5370004379171232440), I use as an example the impossibility of the IRS hiring 87,000 additional agents. It’s simple arithmetic.
87,000 new members of a union that spends 99% of its political monies and activities on ONE party couldn’t possibly have implicit bias in an organization that is able to hide behind Code imposed data privacy restrictions. Oh, of course not.
Pray tell what that has to do with IRS funding. Surely you’re not advocating for punishing a government agency for the private views of its employees.
This reminds me of the false and exaggerated horror stories of alleged jack-booted thug IRS agents that Congress used to help justify the IRS Reform Act of 1998. This fearmongering is counterproductive and hurts honest taxpayers. See my article on this, “IRS Reform: Politics As Usual?,” 7 Columbia Tax J. 36 (2016), https://ssrn.com/abstract=2745370.
The claims are absurd, as you clearly demonstrated. Unfortunately, that has never stopped politicians from caricaturing the IRS as a boogeyman. And has never stopped a significant portion of the population from believing those claims.
Thanks for your efforts.
Nuance matters. What erodes confidence in the tax system more — noncompliance in the small business or EITC sectors that is not caught, or that a lot of people will experience (or hear from others of) intrusive and possibly less-than-professional audits that resulted in either no additional assessment (i.e., wasted everyone’s time and effort) or an additional demand for money that the taxpayer was convinced was wrong but that could not be fought cost-effectively? It is irritating enough when the law and regulations themselves make life complicated (e.g., automobiles used for both personal and business use, the New York “convenience of the employer” test), but it is worse when a taxpayer is convinced that the government is misunderstanding or misapplying the law and the taxpayer has no real recourse.
There has been a lot of rhetoric, but the government has admitted that the absolute number of taxpayers below $400K who will be audited will increase even if the percentage distribution will not. It is obvious to the people that (i) not directing ALL of the new resources to the higher end, where one would expect there to be a lot more potential revenue in absolute dollar terms, represents an intentional decision to go after the lower end and (ii) the claim that the percentages will be stable is a political slogan subject neither to verification nor to control.
The likelihood is that this is going to produce enough actual or perceived disruption — aggrieved constituents call their Members of Congress to complain; those who have pleasant encounters with the IRS do not — that all the new agents may find that Congress really does defund their salaries. Senator Scott let that genie out of the bottle, and it may be hard to put it back in.
It’s hard to be apolitical when only one side peddles conspiracies and falsehoods.
Blame Treasury for the 87,000 figure; it comes from the May 2021 wish-list report of what IRS could do with more funds. “Because the expansion in the IRS’s budget is phased in over a 10-year horizon, each year the IRS’s workforce should grow by no more than a manageable 15%. By the end of the decade, however, the IRS’s budget would be roughly 40% above 2011 levels in real terms as a result of this proposal.”
The Inflation Reduction Act instructs IRS where to spend the money: About $3 billion for taxpayer service, $45 billion for enforcement. Then $25 billion for administrative overhead. I don’t think politicians have to exaggerate, to express displeasure about this allocation.
Will taxpayers with less than $400,000 income be audited? How does IRS know their income, until they do the audit? But the answer is yes, according to Treasury. “Audit rates will not rise *relative to recent years* for those with less than $400,000 in actual income.” Does that include EIC recipients, where the audit rate has dropped from 2.39% to 1.41% (2010 to 2018)? What “recent years” do they mean?
Les, this comment shares your aspiration to “try to avoid being partisan on this site,” but surely you appreciate the challenges in doing so after having penned your op-ed piece (with which I essentially agree).
As those who have some sort of familiarity with my background know, before I was with the IRS collecting the money I was a Contracting Officer for the Department of Defense who spent the money during the obviously politicized spins placed upon Pentagon spending on hardware items; I accordingly have taken flak from ill-informed people regarding my activities at either end of the governmental fiscal process.
Command of the public trust is essential to the IRS’s sound functioning and cannot be overemphasized. Your op-ed appropriately addresses the damages and consequences of the absence of the public trust so indispensably essential to the IRS’s sound and safe functioning.
What jumps out at me, however, is the appearance that your op-ed is specifically targeting politicians who are members of the Republican Party, while ignoring the assault upon “the fragile trust that is the very foundation of our tax system” by politicians who were elected on the Democratic Party ticket (can you say “ObamaCare?”). The fact is that neither the Democrats nor the Republicans have clean hands in promoting the public trust and confidence in the IRS. Politicians from each side of the aisle have had occasion to weaponize the IRS against their political opponents; this does not inspire confidence from the ordinary man or woman on the street.
As you observe, the stakes are higher now than they were during my own days with the IRS. My one occasion of concern for my personal safety was when I was assigned to audit the estate of a mob-connected individual. One of my senior colleague mentors apprised me that such should not be a concern because the Mafiosi like to keep their “business” quiet and out of the public eye, and it costs them far less to settle at the audit stage than to let the matter go into court; moreover, the mere threat to the safety of an IRS agent carries the risk of even additional expense, publicity, and intrusive audits. As matters turned out, the pistol-toting receptionist guy in the atrium of the seedy Brooklyn building I entered, obviously expecting me and calling me by name, directed me upstairs and told me to let him know if anyone in the building or the neighborhood threatened me.
Nowadays, there are people who are far less rational than the mobsters who seriously tend to their business rackets. Which would not be so bad if the US government in general and the IRS in particular were not carrying the increased baggage load of public perceptions of abuse.
Most tax professionals, EA and attorney (that’s me) are happy that the IRS is starting to get the funding that they have needed for years.
We, tax professionals, are generally non-partisan in our tax work. All we really want is an IRS that is professional, available, and up-to-date with information and technology.
Scare tactics based on obvious lies, like 87,000 armed IRS invading America, help only conspiratorial politicians who use lies and hyperpole to amp up their base, not worrying about truth or whether their average constitutient will be better off with a better IRS.
I am hopeful that the IRS will spend the money
“How does IRS know their income, until they do the audit?”
LOL. I wondered the same thing. As to the political debate, very few politicians are true public servants, IMO.
To complement Les’s op-ed:
https://thehill.com/opinion/finance/3613950-stop-the-dangerous-rhetoric-the-truth-about-irs-funding/