Republicans are mad the latest infrastructure plan funds a tax-cheat crackdown

A provision in the bipartisan Senate infrastructure bill announced on June 24 would provide for investing more money in enforcement of laws targeting top earners who evade payment of taxes. Republican senators are furious.

Sen. John Barrasso of Wyoming, the third-ranking member of the minority party leadership, told Axios on Wednesday that “spending $40 billion to super-size the IRS is very concerning.” “Law-abiding Americans deserve better from their government than an army of bureaucrats snooping through their bank statements,” he said.

Sen. Marsha Blackburn warned of “a huge potential for abuse”: “Bigger government results in more waste, fraud, and abuse.”

“Throwing billions more taxpayer dollars at the IRS will only hurt Americans struggling to recover after waves of devastating lockdowns,” said Texas Sen. Ted Cruz. “Instead of increasing funding for the IRS, we should abolish the damn place.”

Even South Carolina Sen. Lindsey Graham, who backed the bipartisan framework, complained, “There’s some people on our side who don’t like empowering the IRS; I don’t mind empowering the IRS if it’s a reasonable thing to do. But I mean, how much uncollected taxes can you gather with $40 billion?”

Iowa Sen. Chuck Grassley tweeted on May 17, this year’s Tax Day, “Im all for catching tax cheats +closing tax gap BUT Biden plan 2pump more $$ into IRS & expand bank reporting is ripe for overreach + imposes more burdens on small biz/family farms.”

Earlier in the year, Biden introduced the American Jobs Plan, a $2.25 trillion transportation, climate, water, broadband, child care, and caregiving infrastructure package, and the American Families Plan, a $1.8 trillion package investment in paid leave, free preschool and community college, and affordable health care. He proposed funding the plans by raising tax rates on corporations and those earning $400,000 or more and by spending $80 million more to enforce existing tax laws.

Republicans unanimously opposed the plans, drawing what Senate Minority Leader Mitch McConnell called a “red line” against any tax increases for wealthy Americans or businesses.

Instead, a group of 10 Republican and Democratic senators agreed on a plan to boost enforcement by half of Biden’s initial request to help fund $567 billion in new transportation, broadband, and water system infrastructure spending. They proposed that the rest of the funding would come from sources that would include petroleum sales, wireless spectrum auctions, and unused 2020 relief funds.

The White House says $40 billion in spending to improve tax law enforcement would more than pay for itself, bringing in $140 billion. The nonpartisan Congressional Budget Office says it would bring in $103 billion over a decade. All of this is money already owed to the government under existing tax law.

“There’s just a ton of money out there that we’re not collecting,” former IRS Commissioner Charles Rossotti told the Washington Post on Friday. “Why don’t we collect some of that before we raise taxes on the people that are already paying?”

In recent years, the IRS has had to cut back on enforcing the law due to massive budget reductions. According to the Center on Budget and Policy Priorities, between 2010 and 2018, the budget for enforcement dropped 24%, the number of enforcement personnel drop 31%, and the audit rate for millionaires dropped 61%.

“The steep decline in audits for high-income individuals stemming from IRS underfunding means that low- and moderate-income households claiming the Earned Income Tax Credit (EITC) are now audited at roughly the same rate as the top 1 percent of filers,” Chye-Ching Huang — then the senior director of economic policy with the Center — told the House Ways and Means Committee in February 2020.

An April report by the Center for American Progress noted that while recent official estimates suggest the United States loses about $600 billion a year in unpaid revenue “on April 13, 2021, IRS Commissioner Charles Rettig told Congress that he believes the United States is losing much more revenue—possibly $1 trillion or more every year.”

Seth Hanlon, one of the report’s authors, told The American Independent Foundation in May that smarter IRS enforcement would mean more compliance for the richest Americans — but fewer audits for everyone else.

“The whole point is it will let the IRS target audits in a smarter way, so honest people are gonna be less likely to be audited. People earning under $400,000 — as long as they’re tax compliant — are gonna be less likely to be audited. The audit rate for those earning under $400,000 won’t go up,” he said.

Polling show strong popular support for making sure richer Americans pay their fair share. An April Monmouth University poll found 65% support for funding Biden’s spending proposals with increased revenue from those making more than $400,000, compared to 33% opposition.

Published with permission of The American Independent Foundation.