What Will the IRS Do With $80 Billion?

  • In Business
  • 2022-08-17 01:08:02Z
  • By The Fiscal Times

Republicans and anti-tax activists are railing against the $80 billion in additional funding provided to the IRS through the Inflation Reduction Act, with some conjuring terrifying images of 87,000 armed tax agents squashing innocent Americans under a dictatorial federal boot.

Sen. Chuck Grassley (R-IA), who serves on the Finance and Budget Committees, told Fox News that he was worried about the prospect of an IRS "strike force that goes in with AK-15s already loaded, ready to shoot some small businessperson in Iowa."

Rep. Matt Gaetz (R-FL) - referring to a report that the IRS has been buying ammunition - claimed wildly that the government is arming the IRS because "Joe Biden is raising taxes and disarming Americans."

But the reality of what the IRS plans to do with its extra funding will likely be far more mundane. "It's unbelievable that we even need to say this, but there are not going to be 87,000 armed IRS agents going door-to-door with assault rifles," Senate Finance Committee Chair Ron Wyden (D-OR) told Politico's Brian Faler.

Leaving aside the paranoid fantasies ricocheting around the more extreme reaches of the Internet, Faler identifies five things to know about what the IRS will likely do with the money:

1) Hire more people - though it's not clear exactly how many. The 87,000 figure that has made headlines is an estimate provided by the Treasury Department last year, and includes people who would be hired over the next decade to fill in for tens of thousands of expected retirees. Whatever the actual number, the hiring will be for all kinds of positions, including auditors, tech people and customer service specialists.

2) Raise the audit rate. The Biden administration says it will not audit households earning less than $400,000 per year. Still, a major goal of the extra funding is to increase the audit rate for high-income taxpayers and corporations - and as Faler notes, that could be tricky in some circumstances, since sometimes it can be hard to know how much someone earns until they are audited. Nevertheless, it's worth noting that audit rates for the rich have plummeted in recent years, and few Americans get audited in any case - "just 0.1 percent of those making between $75,000 and $100,000 in 2019," Faler says.

3) Reverse the shrinking. Thirty years ago, the IRS had 117,000 employees - and now has just 79,000, despite the country's population growing by nearly a third over the last three decades. Much of the additional funding will go toward simply recovering capabilities that were lost over time due to funding cuts.

4) The spending will pay for itself, and more: Tax analysts widely agree that the $80 billion will help the IRS recover far more revenue. The Congressional Budget Office estimates that the IRS will bring in an additional $124 billion over 10 years, above and beyond the additional funding. Some experts say the figure could be substantially higher.

5) The plan is still developing: The IRS is still working on a plan for how to spend the money, which in any event will be doled out over many years. The CBO expects the tax agency to spend just $5 billion of the total in the first year.

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