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Last week, Senate Democrats blocked an effort to pass commonsense legislation to reform the IRS. Finance Committee Chairman Ron Wyden (D-Ore.) blocked Senator Mike Braun’s (R-Ind.) “Simplify, Don’t Amplify the IRS Act,” legislation that implements important, common-sense reforms that protect taxpayers and hold the IRS accountable. 

President Biden and Congressional Democrats want to give the IRS $80 billion in mandatory funding over the next 10 years to hire 87,000 new agents. The majority of this new funding will be used to audit, harass, and target taxpayers – the proposal includes 23 times more funding for enforcement than for taxpayer services.  

As Senator Braun explains in his speech, Democrats seek this funding despite the IRS failing in its most basic duties: 

The IRS has got a bad track record. They often fail to be good stewards of taxpayer money and protect highly sensitive information. Yet, the President and Congressional Democrats want to throw another $80 billion into the IRS.”  

In response to Democrats’ proposal, Senator Braun introduced his bill, which contains several reforms to the IRS such as prohibiting the Democrat bank snooping proposal, holding IRS agents accountable when they leak taxpayer information, and ensuring the IRS is not wasting time on partisan union activity: 

The Simplify, Don’t Amplify the IRS Act would stop the Biden Administration from growing the power of the IRS. The bill would stop attempts to target Americans and small businesses by snooping into their bank accounts, credit union accounts, Venmo, PayPal, CashApp,” Braun explains, “It would repeal the Democratic ban on cutting state taxes. It would hold IRS employees accountable when they release private taxpayer information and ensure that the IRS spends time not doing its union activity when it should be helping Americans when they got an issue, especially during tax filing season.” 

Unfortunately, Senator Ron Wyden (D-Ore.) took to the Senate floor after Sen. Braun to disparage these commonsense reforms. Sen. Wyden insisted that this proposal would simply benefit the wealthiest in American by allowing them to avoid taxes: 

The net effect of this proposal is to hobble the IRS and let the wealthiest in America get out of paying what they owe.” 

In reality, the primary victims of a powerful IRS are low- and middle-income Americans and small businesses. New IRS enforcement and snooping will fall on American families and small businesses, not the “rich.” 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. The IRS will go after easier targets to find this money instead: businesses and individuals without legal teams and accountants.  

The IRS plans to increase small business audits by 50 percent and the IRS funding proposed by Democrats would lead to 1.2 million more annual IRS audits, about half of which would hit households making less than $75,000. Additionally, the Biden administration’s proposal to have the IRS snoop on bank accounts would hit an estimated 87 million Americans earning less than $400,000 per year and could hit up to 134 million Americans earning less than $400,000, according to an analysis by the Joint Committee on Taxation (JCT) 

Sen. Wyden also blamed Republican funding cuts for the agency’s failure to do its job: 

“The agency is struggling with basic services because year after year there have been Republican budget cuts that have decimated the ability of the agency to meet people’s needs.” 

The IRS has plead poverty for decades, regardless of funding levels. In reality, the IRS has proven time and time again that it cannot spend responsibly and complete the most basic of tasks, even when given the funds to do so.  

For example, the IRS has tried and failed for 40 years, regardless of funding level or who controls government, to update its main computer system. ATR compiled a list of key news articles documenting the IRS failure, starting in 1982.  

In 2021, 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 to be able to prepare training packages.” At the time, almost 40 percent of printers were not working at tax processing centers in Ogden, Utah and Kansas City, Missouri. In many cases, the only thing wrong with the printers is that no employee had replaced the ink or emptied the waste cartridge container.  

The agency needs reform, not more money and more power. Sen. Braun’s legislation would help achieve this through numerous important reforms:

1. Prohibits the creation of an IRS bank reporting regime. In addition to new funding and agents, the Biden administration wants to give the IRS new power to automatically access bank accounts, credit union accounts, and Venmo, PayPal, and CashApp account inflows and outflows for all business and personal accounts. Sen. Braun’s bill would prohibit this. 

2. Repeals the Democrat ban on cutting state taxes. In a last-minute addition to the partisan $1.9 trillion Biden spending plan in March, Democrats snuck a provision into the bill prohibiting states from cutting taxes. Sen. Braun’s bill repeals this ban.  

3. Holds IRS employees accountable when they release private taxpayer information. This bill would ensure that IRS employees are held accountable when there is substantial evidence that they engaged in illegal activity. Currently, there is an exceedingly high standard of proof required to discipline employees which ensures bad actors can keep their jobs or escape punishment. This bill increases the penalty for leaking private information from $5,000 to $250,000. It also reduces the burden of proof necessary to fire an employee accused of releasing this information. The new requirement to prove wrongdoing would be having “substantial evidence,” rather than a “preponderance of evidence.” 

4. Codifies rule encouraging agencies to reduce wasteful refundable tax credit payments. A recent report by the TIGTA, found high improper payment rates for three refundable tax credits – the Earned Income Tax Credit (EITC), Additional Child Tax Credit (ACTC), and the American Opportunity Tax Credit (AOTC). The report estimated that improper EITC payment rates were 24 percent or $16 billion, ACTC improper payment rates were 12 percent or $4.5 billion, while ACTC improper payment rates were 26 percent, or $2.3 billion. The bill codifies a 2009 rule to increase federal agencies’ accountability for reducing improper payments. 

5. Codifies the Trump administration rule protecting non-profit organizations from political targeting. This bill would codify the final Rule issued by the Trump administration protecting tax-exempt organizations from unnecessary filing requirements. The Trump Rule ensured that many tax-exempt entities including 501(c)(4)s and 501(c)(6)s do not have to provide the IRS with a list of donors.  

6. Ensures the IRS spends its time helping taxpayers, rather than spending it on partisan union activity. Specifically, this bill would prohibit agency employees from engaging in taxpayer-funded union time during tax filing season, ensuring that agency employees are doing what they are paid to do. Currently, IRS employees are given an immense amount of Taxpayer- Funded Union Time (TFUT). In fiscal year 2019, 1,421 Treasury employees consumed 353,820 hours of TFUT. The compensation costs for this time were $17.27 million. Further, individuals on TFUT may freely use government property, a cost amounting to $2.5 million.  

Lawmakers should support Sen. Braun’s reforms to ensure taxpayers are protected from IRS overreach and abuse. The legislation provides an important contrast to the Administration’s plan to give the agency $80 billion in new funding, hire 87,000 new agents, and give bureaucrats intrusive new power like the ability to snoop on virtually every bank account of American families and small businesses.