Funding for audits, investigations, and other tax enforcement would be 23 times greater than funding for taxpayer education and assistance under Democrats’ just-passed tax and spend bill.
The bill will fund 1.2 million more annual IRS audits; about half will hit households making less than $75k.
Out of nearly $80 billion in new IRS funding, $44.9 billion, more than half, will go directly towards enforcement. The agency will receive a comparatively meager $1.93 billion in funding for taxpayer services, which include things like pre-filing assistance and education, filing and account services, and taxpayer advocacy services.
Clearly, the goal of this funding is to empower the IRS to audit and harass millions of American families, self-employed people, and small businesses including cash heavy businesses like nail-salons, barbershops, and food trucks. It would add a whopping 87,000 new IRS agents – enough to fill Nationals Park twice. That is a greater quantity of agents than all the personnel on all 11 U.S. aircraft carriers.
Any new IRS funding should be alarming given the IRS has a history of incompetence and corruption. In fact, most recently, the progressive group ProPublica announced it had the tax returns of thousands of taxpayers stretching back 15 years. This sensitive taxpayer data was either obtained through an unauthorized leak by an IRS employee or through a data breach – either way the IRS failed to safeguard taxpayer information.
More IRS Funding Will Lead to More Audits of the Middle Class and Small Businesses
Legions of new IRS agents will be unleashed for invasive and time-consuming audits of middle class Americans and small businesses. The IRS previously announced a goal to increase small business audits by 50%.
As previously reported by CNBC, experts say a fattened-up IRS would go after small businesses that necessarily depend on cash transactions:
Certain small businesses may face an audit under the plan. “I think the industries that should be concerned are those in cash,” said Luis Strohmeier, a Miami-based CFP and partner at Octavia Wealth Advisors.
[He expects the agency to scrutinize cash-only small businesses like restaurants, retail, salons and other service-based companies.]
The wealthy and large corporations already have armies of lawyers and accountants that ensure they legally take advantage of the plethora of credits and deductions offered by the tax code.
Further, the IRS already audits the largest corporations at high rates. It doesn’t matter how much more the agency receives in funding – they will not find violations in the law that do not exist.
After the agency comes to this obvious conclusion, they will still be pressured to go find the $400 billion this funding is supposed to create. They will go after easier targets to find this money instead: businesses and individuals without legal teams and accountants.
New IRS enforcement will fall on American families and small businesses, not the “rich.”
Additional Funding Will Empower the IRS to Harass and Abuse Taxpayers
The IRS has been notorious for using its power to harass and abuse taxpayers.
The last time the Democrats were in power, the IRS wrongly used its authority to target and harass taxpayers, especially conservative non-profits. Most notably, the Obama IRS was caught unfairly denying conservative groups non-profit status ahead of the 2012 election. Lois Lerner’s political beliefs led to tea party and conservative groups receiving disparate and unfair treatment when applying for non-profit status, according to a detailed report compiled by the Senate Finance Committee. Because of Lerner’s bias, only one conservative organization was granted tax exempt status over a period of more than three years.
Additionally, TIGTA has repeatedly documented the IRS violating taxpayer rights. In one 2017 example, the IRS Criminal Investigation Division (IRS-CI) regularly violated taxpayers’ rights and skirted or ignored due process requirements when investigating taxpayers for allegedly violating the existing $10,000 currency transaction reporting requirements.
In these reporting requirement cases, almost none found actual fraud, the IRS seized financial assets before ever having talked or consulted with the investigated taxpayers, the IRS didn’t attempt to verify reasonable explanations investigated taxpayers offered, taxpayers were not informed of important information nor the purpose of the interview, and IRS-CI agents most often didn’t properly identify themselves. These were all offenses considered flat out violations of taxpayer rights afforded in the Internal Revenue Manuals.
Most voters are aware of this abuse, and subsequently believe that the IRS is already too powerful. A June 19 – 22 Fox News National Survey of 1,001 registered voters asked if the IRS has “too much power.” 65 percent said yes, 31 percent said no. The same question asked in June 2019 produced a result of 60 percent yes, 34 percent no.
Because of this radical increase in funding coupled with no reforms, the agency will continue with its culture of abuse except now with more resources.
IRS Funding is Yet Another Way to Funnel Taxpayer Money into Democrats’ Campaigns.
New IRS funding will be a boon for the union that represents IRS employees. This union overwhelmingly supports Democrat candidates so new IRS funding will also shovel more money into Democrat campaign coffers:
- The left-wing National Treasury Employees Union represents 150,000 taxpayer-funded federal employees across 31 departments and agencies. The NTEU is famous for aggressive use of lawsuits in order to advance Democrat union priorities.
- NTEU collects dues from roughly 70,000 IRS employees, nearly half of NTEU’s total membership.
- NTEU shovels 97 percent of their money into Democrat campaign coffers. In the 2019-2020 campaign cycle, NTEU’s political action committee raised $838,288. Out of $609,000 in spending on federal candidates, an overwhelming 97.04 percent went to Democrats.
- IRS employees regularly perform Democrat union work on the taxpayer dime. In fiscal year 2013, IRS employees spent over 500,000 hours on union activity, costing taxpayers $23.5 million in salary and benefits. To add insult to injury, the IRS had at least 40 out of 201 workers solely devoted to union activities that made $100,000. In 2019, 1,421 IRS and other Treasury Department employees spent 353,820 hours of taxpayer-funded union time (TFUT), costing $19.77 million in salary and use of government property.
New IRS Funding Would Reward Incompetence and Irresponsibility.
The IRS has proven time and time again it cannot spend responsibly and complete the most basic of tasks. The agency needs reform, not more money and more power.
Several audit reports have demonstrated how the agency’s inability to do its job is due to incompetence, not lack of funding:
- A Treasury Inspector General for Tax Administration (TIGTA) report on the 2021 Filing Season found that almost 40 percent of printers were not working at tax processing centers in Ogden, Utah and Kansas City, Missouri. However, in many cases the only thing wrong with the printers is that no employee had replaced the ink or emptied the waste cartridge container: “IRS employees stated that the only reason they could not use many of these devices is because they are out of ink or because the waste cartridge container is full.”
- This year, despite having funding for new hires, the IRS only achieved 37 percent of their hiring goal. They had trouble onboarding new hires as well, as it was “difficult to find working copiers (as noted previously) to be able to prepare training packages.”
- In 2016, the IRS has lost track of laptops containing sensitive taxpayer data. TIGTA estimates that the IRS had failed to properly document the return of 84.2 percent, or more than 1,000 computers due to be returned by contract employees.
- A TIGTA report in 2017 showed that the IRS rehired more than 200 employees who were previously employed by the agency, but fired for previous conduct or performance issues.
- Each year the IRS hangs up on millions of callers — a practice they refer to as “Courtesy Disconnects.” Currently, if you call the IRS, you have a 1-in-50 chance of reaching a human being.
- According to the National Taxpayer Advocate’s 2014 Annual Report to Congress the IRS was unable to justify spending decisions. As the report stated: “The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”
- The agency has repeatedly failed to compile legally required tax complexity reports. These reports are supposed to contain the IRS’s specific recommendations on how to make the tax code easier to comply with. Since 1998, the IRS has done so just twice – in 2000 and 2002.
- In 2015, the IRS was spending $1,000 an hour hiring a litigation-only white shoe law firm for an investigation, despite having over 40,000 employees dedicated to enforcement efforts.
- In 2015, the agency has been caught red-handed wasting taxpayer dollars on Nerf footballs, the world’s largest crossword puzzle, extravagant $100 dollar lunches, and more.
As Norquist wrote in one op-ed, “The IRS should not be rewarded for failing to reform, failing to obey the law, failing to fire those who break the law, and spending tax dollars to act as the enforcer for a partisan political machine.”
Despite claims that additional IRS funding is needed to solve problems with taxpayer services, like taxpayers being incapable of getting an IRS employee on the phone, of navigating through paperwork, of paying taxes, etc., virtually none of the funding in this plan would go towards these initiatives.
Democrats seek to supersize the IRS for the sole purpose of unleashing the agency on the American people via audits and investigations. Inevitably, low-income Americans, middle-income Americans, and small businesses will be the primary targets.