The first GOP bill would cut the IRS budget — and cost the government money

WASHINGTON — Republicans are preparing to vote on their first bill since taking over the House of Representatives: a bill to remove $71 billion in additional funding for the Internal Revenue Service.

But the bill would end up costing the federal government far more than it saved.

The token legislation fulfills a promise to prevent President Joe Biden from targeting an imaginary horde of IRS agents at middle-class families across America. Democrats approved the additional funding last year to fill the gap between what Americans owe the IRS overall and what they actually pay.

the This was announced by the Congressional Budget Office on Monday that if the Republican bill becomes law, it would save $71 billion up front, but would result in the government missing out on $185 billion in uncollected tax revenue, for a net loss of $114 billion over a decade corresponds. (The bill won’t become law because Democrats still control the Senate and White House.)

“This is a huge tax cut for rich tax dodgers,” said Ron Klain, White House chief of staff said on Twitter of the Republican bill Monday. “Increases the deficit.”

Deficit haters on the Federal Budget Responsibility Committee said the bill would “encourage tax evasion” by making it easier for companies and individuals to evade their obligations.

“Increasing funding for the IRS is one of the only ways to generate more revenue without raising taxes, and it has a long history of bipartisan support — including from every new president from Ronald Reagan to Joe Biden”, the CRFB wrote in a blog post.

House Speaker Kevin McCarthy (R-Calif.) announced shortly after winning the Speaker’s gavel Saturday that Republicans would “end wasteful government spending.” He won over Republicans who opposed him in part by promising that the House of Representatives would vote to balance the federal budget over a short period of time.

The cut in IRS funding goes against the goal of balancing the budget, but it fits with a broader Republican complaint that Democrats have “armed” the federal government against the average American. Republicans have claimed that new IRS funding approved last year would result in 87,000 new IRS agents harassing people, though it’s not clear how many new hires would be chartered accountants.

Before the new funding, the IRS budget was 30% lower than it was a decade ago. Former IRS commissioner Charles Rettig testified last year that the agency had fewer than 79,000 full-time employees and that it would have to hire 52,000 people over the next six years just to replace retired employees. The agency previously estimated it could use a funding boost to increase the workforce by 87,000 over 10 years.

Most of the “tax gap” results from households failing to report business income to the federal government. Unlike wage income, which is reported directly to the federal government so that payroll taxes can be deducted, business income is not automatically reported.

Rettig, a Republican appointed by former President Donald Trump, insisted the additional funding would not be used to increase exams for people earning less than $400,000, although the Congressional Budget Office had previously said: “small fraction” of the increased income would come from households earning less than that amount.

“These resources are absolutely not about increasing screening for small businesses or middle-income Americans,” Rettig said said in a letter to the senators last summer.

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