Republicans get their cuts from the IRS; Democrats say they expect little near-term impact

WASHINGTON (AP) — House Republicans are seeking to deliver on their campaign promise to rein in the IRS with built-in debt ceiling cuts and a package of budget cuts passing through Congress.

The bill reverses $1.4 billion paid to the federal tax collector under the Democrats’ health and energy program that was approved last year on party-line votes. The White House says the debt deal also includes a separate agreement to collect $20 billion from the IRS over the next two years and divert those funds to other non-defense programs.

Democrats spent a lot of political capital to get more money from the IRS last year. They faced an avalanche of campaign announcements, many of them misleading, about the planned hiring of 87,000 “new agents” to target lower and middle class Americans.

Now, Biden administration officials are offering assurances that spending cuts won by Republican negotiators will have minimal impact on the agency’s operations over the next few years.

The agency is on track to still get nearly three-quarters of the $80 billion increase that Congress approved for the agency last year. And the agency has the ability to spend some of that money sooner than expected, officials said.

“The IRS has the resources it needs in the short term to improve customer service and prosecute the wealthy and tax evaders,” Deputy Treasury Secretary Wally Adeyemo tweeted.

But for Republicans looking to drum up support for the bill, spending cuts for the IRS represent a key selling point. The first bill House Republicans passed this year would have reversed most of the extra dollars Congress had approved for the IRS the year before. The bill went nowhere in the Democratic-controlled Senate.

As for the debt deal, “what it does is put the IRS front and center. We have a down payment in this bill of $1.4 billion to cancel their hiring of enforcement the law this fiscal year. In the appropriations process, we’ll be back for more,” said Rep. Patrick McHenry, RN.C., a top GOP negotiator.

In April, agency leaders released details of how the agency would use the $80 billion injection to improve operations, pledging to invest in new technology, hire more customer service and expand its ability to audit high net worth taxpayers. The plan lays out details of how the IRS would allocate the $80 billion through fiscal year 2031.

Now, with some of this money recovered, one wonders what programs could be relegated to the background. Treasury officials say their plan to develop a free online tax filing system, which is in its pilot development phase, for example, will not be affected by the cuts.

But some analysts are skeptical of the Biden administration’s assurances. Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center, said “losing the funds must be a setback” for the agency. “With less money and resources, everything will slow down, it may take a little longer” to develop some promised programs, he said. “I don’t know if it will come out of the service, app, technology or whatever.”

Rep. Richard Neal of Massachusetts, the top Democrat on the House Ways and Means Committee, said he spoke with the Treasury about the impact of the bill’s cuts to IRS funding. on the debt limit: “I left, if not happy, at least satisfied.”

He said the possibility of default was a much bigger concern, so he understood why the White House agreed to the cuts.

“The fact that the money is going to be diverted to other initiatives is not my first choice, but I think to get this past the goal line, in terms of the contrast of an international calamity, it has to be done,” he said. .

Neal said he believed the IRS would not be greatly harmed as a result of the cuts, adding, “I was assured that.”

The Congressional Budget Office has projected that the $1.4 billion write-off will actually increase deficits by about $900 million over the next decade because it will lead to lower tax revenues. decade and reduced revenue,” the May 30 report to Chairman Kevin McCarthy, R-Calif reads.

The CBO projections did not include the $20 billion the White House agreed to divert to other programs.

Rep. Brendan Boyle, the top Democrat on the House Budget Committee, said the IRS commissioner appointed by former President Donald Trump repeatedly spoke to Congress about the dire staffing shortages the IRS was experiencing. . The agency’s enforcement staff has shrunk by about a third since 2010, and Boyle said this has led to low-income and minority taxpayers being audited at a higher percentage than wealthy ones.

“I’m very concerned that some of these cuts might impact where the IRS wants to go, and that brings more fairness when you’re talking about audits,” Boyle said. “That’s definitely an area over the coming weeks and months that I’m going to follow.”

Arguing for IRS cuts shortly before the House vote Wednesday night, Rep. Garret Graves, R-La., praised the Republican effort.

“I’ve never heard a voter say, ‘God, I wish I could have more audits,'” Graves said.

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