One of the bogeymen that Republicans took aim at in the midterm elections was the Internal Revenue Service. That was no surprise; the IRS has always been an easy target. After all, who enjoys navigating the overly bureaucratic process of filing taxes, let alone facing the prospect of being audited? But this time around, Republican candidates across the country had a new sound bite for their ads and stump speeches: Congress bolstered the IRS’s budget by $80 billion when Democrats passed the Inflation Reduction Act, which Republicans misleadingly claimed would create an “army” of 87,000 new IRS agents that would go after ordinary taxpayers.
If they won back control of Congress, Republicans promised, they would undo the Democrats’ expansion of the IRS. As recently as last week, Texas Senator Ted Cruz threatened to shut down the government if Congress doesn’t block the new funds. But after their lackluster showing at the polls this election — in which they won a narrow majority in the House but failed to regain control of the Senate — Republicans ought to reconsider their fiscal priorities and leave the IRS funding alone.
Attacking a tax-collecting agency might make for an appealing campaign talking point, but it doesn’t make for good governance. That’s especially true when considering the fact that Republicans’ main line of attack against this provision in the Inflation Reduction Act — that the IRS will use the additional funds to deploy 87,000 new agents to audit poor and middle-class people — is not close to the truth.
The reality is that the IRS has seen meaningful budget cuts in the past decade because of Republican efforts that started in Congress in 2011 and continued through Donald Trump’s presidency. And as a result, the agency’s ability to effectively enforce the existing tax code has been greatly diminished.
Between 2010 and 2019, for example, tax return audit rates dropped by 72 percent, according to the United States Government Accountability Office, and criminal referrals saw a similar decline. That’s not because Americans suddenly got better at paying the taxes they owe; it’s because the IRS didn’t have enough enforcement officers to catch tax evaders. As Trump’s own Treasury Department noted in a report, “The decline in IRS compliance function employees over the past few fiscal years has likely contributed to this decrease in fraud referrals.”
This is where Republican claims are simply wrong: While the 87,000-agent figure is not entirely made up — it comes from a Treasury report that suggested how the IRS could use $80 billion — it doesn’t account for the fact that the tax-collecting agency was on track to lose up to 50,000 employees over the next several years, or the fact that the number of employees under its purview has steadily declined since the start of the last decade. By giving the agency enough funding to hire more agents, the IRS would certainly be beefing up its enforcement capacity, but it would, in large part, be making up for attrition. (The agency today is about a third of the size it was 30 years ago.)
Another flaw in Republicans’ argument to slash the new IRS funding is their contention that increasing the number of enforcement officers means that poor and middle-class households are going to be targeted for audits. As things currently stand, the poorest households are already disproportionately scrutinized by the IRS. According to the Transactional Records Access Clearinghouse at Syracuse University, for example, people making under $25,000 a year are five times more likely to be audited than the average taxpayer making over $25,000. And the reason that’s true is because Republican-imposed budget cuts made auditing the wealthy less feasible.
In fact, because of a sharp decline in audit rates of people with annual incomes of over $1 million — that is, the group of people who are likeliest to evade taxes — poor people are now audited at almost the same rate as the wealthiest Americans. That’s one of the main reasons the IRS asked for more funds in the first place: to crack down on wealthy tax evaders.
If Republicans, in fact, care about reducing the deficit, then it’s time for them to put their money where their mouths are. That means that at a bare minimum, they ought to allow the government to collect the taxes that already exist, especially if lawmakers aren’t willing to raise taxes on the wealthy. The government loses hundreds of billions of dollars from unpaid federal taxes each year because of wealthy households’ unreported income — or some $7.5 trillion over the next decade.
In other words, that money could be raised and put toward reducing the deficit without imposing a single new tax simply by giving the government the resources it needs to enforce the existing tax code. By fighting to slash the IRS’s budget yet again, Republicans would be making it very clear that they’d rather protect wealthy tax evaders than reduce the deficit.
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