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Conservative groups mount opposition to increase in IRS budget, threatening White House infrastructure plan

Charles P. Rettig, commissioner of the Internal Revenue Service, arrived to testify during a Senate Finance Committee hearing on the IRS budget request on Capitol Hill in Washington,
Charles P. Rettig, commissioner of the Internal Revenue Service, arrived to testify during a Senate Finance Committee hearing on the IRS budget request on Capitol Hill in Washington,TOM WILLIAMS/POOL/AFP via Getty Images

WASHINGTON — Conservative political groups are mobilizing against a key element of a bipartisan infrastructure deal, and their opposition could make it harder for the US government to collect unpaid taxes.

Congressional Democrats and Republicans have agreed to increase funding for the Internal Revenue Service so that the agency can bring in more tax revenue, hoping the money can help pay down some of the infrastructure package’s expected price tag. The early contours of the infrastructure blueprint have won the White House’s support, but the IRS provision in particular is drawing opposition from well-funded conservative groups, which are strongly opposed to expanding the reach of a tax-collection agency that they long have alleged is politically motivated.

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Among the conservative groups spearheading the opposition are the Committee to Unleash Prosperity, FreedomWorks, the Conservative Action Project, and the Leadership Institute. They are preparing a letter that warns Republicans should not negotiate with the White House unless they agree to ’'no additional funding for the Internal Revenue Service.’'

The letter, obtained by The Washington Post ahead of its release, is expected to gain support from at least a dozen other conservative groups this week, with plans to send it soon to Senate Minority Leader Mitch McConnell, R-Ky., and other Senate GOP leaders.

The conservative advocates’ push could test their political muscle under the Biden administration. Under former President Barack Obama, conservative activists connected to the tea party movement successfully pushed GOP lawmakers to fiercely oppose new government spending, leading to major cuts that hamstrung the IRS. But former president Donald Trump spent aggressively while in office, blowing past the warnings of the party’s libertarian wing and deflating conservative opposition to new programs.

It is unclear whether the GOP zeal to cut federal spending will reemerge under a new Democratic administration. A successful effort could imperil bipartisan support for the $974 billion infrastructure package, a top priority of the Biden administration as it seeks major upgrades to the nation’s roads, bridges, highways, and other public-works projects.

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’'Republicans are going to double the IRS budget? That’s crazy. There’s very strong opposition to this,’' said Stephen Moore, a former outside economic adviser to Trump who is leading the effort. An op-ed on the measure that Moore wrote with Steve Forbes also has circulated in Congressional Republican offices.

The bipartisan infrastructure deal reached last month by the White House and a group of Democratic and Republican senators proposes $40 billion for heightened IRS enforcement, with an expectation that it would result in around $140 billion in new revenue. In theory, at least, the idea has broad support among Democrats and Republicans alike, who in recent years have pointed to weaker IRS enforcement and estimates of the nation’s persistent ’'tax gap,’' or the difference between what taxes are owed to the government and what is actually paid.

Over the past decade, persistent budget cuts have hurt the IRS’s ability to conduct audits, including those targeting wealthy and large corporations. Tax experts have expressed alarm that the weakening of the IRS has helped fuel the increase in US income inequality, in part because the rich have more tools to dodge the increasingly weak tax collection agency.

Kevin Kuhlman, vice president for federal government relations at the National Federation for Independent Business, said that while his group has not taken a formal position on an IRS budget boost, proposals to increase funding should ’'proceed with caution.’'

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’'Reports of increased audits, enforcement, and reporting requirements raise red flags with our members,’' Kuhlman said. ’'We would urge and encourage instead increased compliance assistance, better customer service, and remedying the processing delays.’'

There is some reason for negotiators to be optimistic. Senior Republicans are under intense pressure from business groups to approve an infrastructure deal that corporate America has long sought. Many Republicans also see a big bipartisan infrastructure deal as the best hope for weakening the chances of a broader Democratic spending package, which probably would have bigger tax increases and include climate and social programs that the GOP is eager to kill.

Supporters of the efforts to enhance the IRS plan to hammer home the message that those who oppose an increase in the agency’s budget are helping rich tax cheats and hurting ordinary, law-abiding people.

’'Why is it fair to working Americans who pay their taxes to allow people who can afford fancy lawyers and accountants to cheat?’' King said. ’'I’m not talking about tax avoidance. I’m talking about outright cheating, hiding income.’'

Trump’s budgets also called for increasing funding for the IRS — in part because the GOP was eager to improve implementation of the 2017 tax law — which some moderate lawmakers have seen as giving political cover to Republicans who fear supporting the IRS funding increase will expose them to attacks from the right.

Animating Republican opposition is more than a decade of ill will between the GOP and the IRS. Nearly a decade ago, a top IRS official acknowledged its auditors had scrutinized the finances of conservative leaning groups based on their names - raising the specter of political targeting even though the agency did eye some liberal nonprofit groups as well.

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More recently, conservatives say the IRS is to blame after a major story by ProPublica revealed some of the wealthiest Americans pay relatively little in taxes.