Democrats Vote To Sic A Horde Of IRS Auditors On American Families And Small Businesses

Democrats Would ‘Roughly Double’ The Size Of The IRS To Send A Swarm Of Agents After Middle-Class Americans And Small Businesses

“The IRS money, about $80 billion over a decade, would roughly double the size of the agency and be aimed at tougher enforcement …” (“Joe Manchin Reaches Deal With Chuck Schumer on Energy, Healthcare, Tax Package,” The Wall Street Journal, 7/28/2022)

• “Providing the IRS with an influx of funding has been a top priority for President Biden. It has emerged as one of the most prominent financiers of the Inflation Reduction Act that Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., unveiled last week.” (“How Democrats' Beefed-Up IRS Could Hurt Low-Income Americans,” Fox Business, 8/05/2022)

CBO: “The proposed increase in spending on the IRS’s enforcement activities would result in higher audit rates … [T]he [audit] rate would rise for all taxpayers … Higher audit rates would probably also result in some audits of taxpayers who would later be determined not to owe additional taxes.” (“The Effects of Increased Funding for the IRS,” Congressional Budget Office, 9/02/2021)

THE WALL STREET JOURNAL EDITORIAL BOARD: “The pact between Sen. Joe Manchin and Majority Leader Chuck Schumer includes $80 billion in new funding for the tax man. Democrats claim this ‘investment’ will yield more than $200 billion in revenue. That estimate is highly speculative, but if it’s anywhere close to right IRS auditors will soon be coming after tens of millions of Americans. The $80 billion is more than six times the current annual IRS budget of $12.6 billion. The money will be ladled out over nine years and comes with few strings attached. The main Democratic command is for the tax agency to bring the hammer down on taxpayers. The bill earmarks $45.6 billion for ‘enforcement,’ including ‘litigation,’ ‘criminal investigations,’ ‘investigative technology,’ ‘digital asset monitoring’ and a new fleet of tax-collector cars. The result will be far more audits, civil suits and criminal referrals.” (Editorial, “The IRS Is About to Go Beast Mode,” The Wall Street Journal, 8/02/2022)

• “The new wave of audits will hit taxpayers even as tax revenue as a share of GDP is back close to its historic norm of 18.5% and may be going higher as corporate and individual tax revenue soars. Tax receipts were up 25% in the first nine months of fiscal 2022 after rising 18.3% in fiscal 2021. The federal government isn’t starving for revenue. Congress wants more tax revenue because it can’t control its appetite for spending. That’s why it wants a tax agency in beast mode.” (Editorial, “The IRS Is About to Go Beast Mode,” The Wall Street Journal, 8/02/2022)

This IRS Dragnet Will Be Aimed Squarely At Middle-Class Americans ‘Because That’s Where The Money Is’

THE WALL STREET JOURNAL EDITORIAL BOARD: “The main targets will by necessity be the middle- and upper-middle class because that’s where the money is. The Joint Committee on Taxation, Congress’s official tax scorekeeper, says that from 78% to 90% of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000. The IRS knows the super-wealthy employ lawyers and accountants who make litigation time-consuming and risky. It also knows that Democrats would howl if the agency pursues fraud in the earned-income tax credit program, despite what the IRS has estimated are $18 billion in improper payments each year.” (Editorial, “The IRS Is About to Go Beast Mode,” The Wall Street Journal, 8/02/2022)

SEN. CRAPO: “What we’ve found from the Joint Committee on Taxation is that the vast majority of those dollars will come from the middle class, the very group that the president and Democrats say will not be targeted. The President continues to pledge that no one making less than $400,000 will see a penny in tax increases, but the JCT shows that of the ‘tax gap’ the IRS dollars would go toward collecting—78-90 percent of that tax gap falls on income below $200,000. The IRS cannot generate the money that the Democrats claim they will from this funding, unless it focuses the target right on the middle class.  That’s what the data shows, and what they don’t want to say.  This supersized IRS will create an army of auditors to come out and go after the tax gap, which lies primarily in income categories under $400,000.” (Sen. Crapo, Press Conference, 12/14/2021)

Lower Income Households Will Also Likely Find Themselves In The IRS Crosshairs

“GOP lawmakers have sounded the alarm over the proposal, warning that it could have serious ramifications for lower-income workers. That's because the IRS disproportionately targets low-income Americans when it conducts tax audits each year. In fact, households with less than $25,000 in earnings are five times as likely to be audited by the agency than everyone else, according to a recent analysis of tax data from fiscal year 2021 by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University. The reason for that is a rise in what is known as ‘correspondence audits,’ meaning the IRS conducts reviews of tax returns via letters or phone calls rather than more complex face-to-face audits…. According to the Syracuse study, more than half of the correspondence audits initiated by the IRS last year — 54% — involved low-income workers with gross receipts of less than $25,000 who claimed the earned income tax credit, an anti-poverty measure.” (“How Democrats' Beefed-Up IRS Could Hurt Low-Income Americans,” Fox Business, 8/05/2022)

“[T]axpayers with a total positive income that ranged from $200,000 to $1 million had one-third the odds of being audited by the IRS compared to the lowest-income wage earners. About 9 million taxpayers reported these high-income levels in 2021, but fewer than 40,000 of their returns were audited, or roughly 4.5 out of every 1,000. That contrasts sharply with lower-income Americans, who faced an audit rate of 13 out of every 1,000.” (“How Democrats' Beefed-Up IRS Could Hurt Low-Income Americans,” Fox Business, 8/05/2022)

‘Small Business Owners May Soon Be In For A Lengthy And Expensive Battle With The IRS, Tax Experts Warn’

“Small business owners may soon be in for a lengthy and expensive battle with the IRS, tax experts warn. A key provision in the Inflation Reduction Act — which throws an extra $80 billion to the IRS to improve the agency’s collection of under-reported income — will end up targeting small business owners to pay for the legislation, according to nonpartisan watchdog the Joint Committee on Taxation. The group estimates that between 78% and 90% of the estimated additional $200 billion the IRS will collect will come from small businesses making less than $200,000 annually. Just 4% to 9% would come from businesses making north of $500,000 a year — meaning the legislation is in sharp contrast to President Biden’s longstanding claim that he wouldn’t raise taxes on anyone making less than $400,000. ‘The IRS will have to target small and medium businesses because they won’t fight back,’ Joe Hinchman, executive vice president at National Taxpayers Union Foundation, told The Post. ‘We’ve seen this play out before … the IRS says “We’re going after the rich” but when you’re trying to raise that much money, the rich can only get you so far.’” (“80% Of New IRS Revenue Will Come From Small Businesses Earning Under $200K: Tax Experts,” New York Post, 8/03/2022)

THE WALL STREET JOURNAL EDITORIAL BOARD: “A particular audit target will be ‘pass throughs’ including Subchapter S businesses that file under the individual tax code. Democrats failed to raise the top individual tax rate, so unleashing IRS auditors is Plan B. Many of these are small businesses that will settle with the IRS rather than fight and endure years of costly litigation. The IRS won only $1.7 billion of the $4 billion in disputed taxes and penalties in cases closed in U.S. tax court in fiscal 2019. But few taxpayers can afford to fight in court.” (Editorial, “The IRS Is About to Go Beast Mode,” The Wall Street Journal, 8/02/2022)

SEN. SHELLEY MOORE CAPITO (R-WV): “When you look at small businesses, we have 113,000 small businesses in West Virginia that would be impacted by this…the invasion of privacy into individuals and small businesses is something that we hear about every day, and I think would devastate our economies. And think of the cost that this is going to be to small businesses. Not only just being audited, but the time and energy and money it takes to answer…When you saw the average amount of recouped tax in some of the smaller businesses in some of the lower incomes, it's $20, $25. It's going to cost them thousands of dollars to be able to answer this.” (Sen. Capito, Press Conference, 12/14/2021)

Fourteen Times More IRS Money Would Go To Enforcement Than To Taxpayer Services, So ‘Americans Shouldn’t Expect Better IRS Service’

Democrats’ bill would allocate $45.6 billion to IRS enforcement, compared to only $3.2 billion for taxpayer services, meaning over 14 times more money is going to enforcement. (U.S. Senate Finance Committee Ranking Member, Press Release, 8/01/2022)

THE WALL STREET JOURNAL EDITORIAL BOARD: “Despite all this new money, Americans shouldn’t expect better IRS service. The agency in the 2022 filing season answered a mere 10% of its phone calls. The Taxpayer Advocate Service revealed in June that as of May 31 the IRS was still sitting on 21.3 million unprocessed paper tax returns, with millions of taxpayers ‘waiting six months or more to receive their refunds.’ Yet the Schumer-Manchin bill devotes only $3.2 billion for ‘taxpayer services.’” (Editorial, “The IRS Is About to Go Beast Mode,” The Wall Street Journal, 8/02/2022)

SENATE REPUBLICAN WHIP JOHN THUNE (R-SD): “The Democrats’ bill does increase, in a significant way, funding for the IRS: $80 billion for 87,000 new employees. Think about that—literally doubles the size of the IRS. Why? Not to improve taxpayer services, only four percent goes toward improving taxpayer service. This goes to allow the IRS to harass businesses across this country. Also proven by the analysis that has been done, it hits disproportionately hard on people and businesses that are making under $400,000 a year.” (Sen. Thune, Press Conference, 8/03/2022)