A 'no-brainer’: Why Democrats will keep pushing for increased IRS funding

·Senior Producer and Writer
·4 min read

When President Biden and 10 bipartisan senators reached an infrastructure agreement in June, increased IRS enforcement was a key for how to pay for it.

The idea, which has long been pushed by policymakers on both sides of the aisle, was to staff up the IRS now with the promise that the investment would be paid back in spades as more tax cheats were caught.

But a wave of Republican pushback led to the idea getting nixed. The lead Republican negotiating the deal, Sen. Rob Portman of Ohio, recently confirmed it was off that table.

But in interviews this week, Democrats made clear the IRS provision remains very much alive as part of the their parallel effort to pass a reconciliation bill.

“This is something the president feels strongly about,” Biden’s top economic aide, Brian Deese, said in an interview with Yahoo Finance. This week marks Biden's first six months in office.

‘We need professionals there’

“You look at economists across the board, and they would say this is not only a no-brainer from a policy perspective, but would generate much needed revenue,” Deese said.

WASHINGTON, DC - JULY 02: National Economic Council Director Brian Deese (R) and White House Press Secretary Jen Psaki talk to reporters during the daily news conference in the Brady Press Briefing Room at the White House on July 02, 2021 in Washington, DC. Deese took questions about Friday's reported jobs numbers, which reported a gain of 850,000 jobs. (Photo by Chip Somodevilla/Getty Images)
National Economic Council Director Brian Deese, right, is President Biden's top advisor on the economy. (Chip Somodevilla/Getty Images)

In a separate interview with Yahoo Finance, House Transportation Committee Chairman Peter DeFazio (D., Oreg.) pointed to falling IRS staff levels over the last decade. Agency turnover is too high, he said, adding “we need professionals there.” 

The funding to go after tax cheats will “make those people pay under existing law what they're supposed to pay,” DeFazio said.

[Read more: America's broken tax system]

The annual tax gap – the difference between what Americans should be paying and what they actually send to the IRS – between 2011 and 2013 was $441 billion, the IRS found. A paper published this year found that the wealthiest 1% of Americans underreport their income by 21%, using complicated tax-dodging schemes the IRS often fails to detect even when they audit returns.

DeFazio, who has his own bill to tackle the tax gap, estimates that the average household pays an additional $3,000 annually in taxes to make up for those taxpayers who aren’t paying all that they owe.

Some Republicans have said they're wary of boosting funding for the IRS because it would give more power to an agency regarded with suspicion by the right following years where they aggressively scrutinized conservative groups over their tax-exempt status.

A different tax system than everybody else

The bipartisan plan had been to spend $40 billion to bolster tax enforcement, which would generate more than $100 billion over the next decade, according to the lawmakers negotiating for the deal. Democrats appear committed to include that funding in their upcoming reconciliation bill and may even try to go further to beef up the IRS.

House Transportation and Infrastructure Committee Chair Peter DeFazio, D-Ore., left, talks to Speaker of the House Nancy Pelosi, D-Calif., during a news conference to discuss the
House Transportation and Infrastructure Committee Chair Peter DeFazio, D-Ore., left, talks to Speaker of the House Nancy Pelosi, D-Calif., during a news conference to discuss the "INVEST in America Act," a five-year surface transportation bill, which directs federal investments in roads, bridges, transit, and rail, at the Capitol in Washington, Wednesday, June 30, 2021. (AP Photo/J. Scott Applewhite)

DeFazio’s bill, for example, would set minimum audit levels for both high-income individuals and certain corporations, in addition to increasing IRS funding. The bill sets a range of minimum audit rates, including a mandate that 50% of households with gross income over $100 million would be audited as well as 90% of corporations with gross income of over $20 billion.

Biden previously pushed for even more funding for the IRS – $80 billion over the coming decade – as Senate negotiators haven't yet announced how much funding they're hoping to include in the reconciliation bill.

However things end up, increasing IRS enforcement, experts say, could help Biden pay for much of his agenda. According to one estimate, the U.S. could generate $1 trillion in revenue over the next decade if action is taken.

“As a country, we need to make sure that our tax system works and that people have trust and faith that people actually pay the taxes that they're owed. And just because of wealth and privilege you don't get to operate in a different tax system than everybody else,” said Deese.

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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