To wit: Republicans are trying to make it easier for corporations and the wealthy to shirk their tax obligations, while making it harder for honest, working-class taxpayers to file their returns for free.
Americans overwhelmingly say the wealthy and corporations don’t pay their fair share in taxes. This view is, er, somewhat at odds with Republicans’ plans to grind down these groups’ tax rates even further.
And that’s not the only way the GOP hopes to reduce their tax payments. It would also defund the tax police, making it easier for rich people to shortchange Uncle Sam.
This week, House Republicans released a financial services appropriations bill that would slash the Internal Revenue Service’s fiscal 2025 funding by more than $2 billion, or about 18 percent from current levels. This is part of a much longer-term plan to sabotage the agency so it can’t collect taxes that are legally owed.
In fact, if you adjusted their proposed 2025 budget numbers for inflation, the IRS’s funding would be down 43 percent since the GOP’s war on the agency began back in 2010 — even as IRS responsibilities have grown more complex and expensive. In that time, the IRS has been enlisted to implement the Foreign Account Tax Compliance Act, combat identity theft and administer various safety-net programs. Unsurprisingly, other resource-intensive priorities — such as audits of megacorporations and millionaires — have fallen by the wayside.
House Republicans argue the agency would still have plenty of cash to spare because Democrats’ 2022 Inflation Reduction Act gave the IRS an additional $80 billion, to be spent over a decade. But there are two problems with this argument.
First, GOP lawmakers have already pruned that investment. As part of the debt limit deal last year, Republicans demanded that a quarter of those funds ($20 billion) be rescinded.
Second, that $80 billion — now down to $60 billion — was intended for longer-term investments separate from the agency’s annual duties.
The money was meant to bring the agency’s IT out of the disco era, for instance. It was also designed to boost the IRS’s enforcement capacity, particularly to increase compliance among wealthy individuals and corporations with complex returns and armies of accountants. These taxpayers can shield income in nesting dolls of partnership returns, for example, which the agency has rarely audited because it lacked the resources and specialized personnel needed to do so.
There’s also much lower-hanging enforcement fruit: At least 25,000 millionaires haven’t filed tax returns at all since 2017. The IRS has only recently begun going after these households. It also recently began auditing companies for abuse of corporate jets.
Reducing the IRS’s annual enforcement funding — as House Republicans explicitly do in this bill, to force the agency to siphon money away from those longer-term investments — costs the government a lot of money. That’s because spending on IRS enforcement offers a huge return on investment, especially when the money is spent auditing the wealthy. In fiscal 2023, enforcement programs collected about $7 for every $1 spent. The longer-term deterrence effects of audits are even larger, as a blockbuster study found last year.
In other words, defunding the IRS not only allows existing cheating and noncompliance to go undetected; it encourages more cheating and noncompliance, and more lost revenue. That’s an unfortunate outcome if you care about reducing federal deficits, as Republican politicians (and voters) often claim they do.
Then there’s the taxpayer service side of things.
This year, the IRS piloted its Direct File program. It allows Americans to file their federal tax returns online for free directly with the IRS, rather than through a third party such as TurboTax.
The pilot was limited to taxpayers with simple returns in just a dozen states. Last week, the agency announced it would make the program permanent and expand its availability nationwide, if states wish to opt in. This expansion would be a popular move: 73 percent of Americans, including 61 percent of Republicans, support rolling out such a program nationally, a new YouGov poll found. That’s unsurprising, since the average American spends $270 and 13 hours filing their taxes.
What’s the GOP response? Again, the opposite of what voters want.
Thirteen Republican-led states have signaled that they’ll refuse to cooperate with the program. And in that new appropriations bill I mentioned, GOP lawmakers inserted language prohibiting the IRS from ever using federal money to “develop or provide taxpayers a free, public electronic return-filing service option.” Which would, of course, kill Direct File altogether.
As always, I implore voters: Look at what politicians would actually do on the issues you care about before awarding them your votes.
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