Removal of $40 Billion in Extra IRS Funding From Senate Bill is Win for Taxpayers

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Posted by Alex Hendrie on Friday, July 16th, 2021, 3:05 PM PERMALINK

Media reports indicate that $40 billion in new funding for the IRS has been removed from the bipartisan Senate infrastructure proposal. The purpose of this new IRS funding is not to help taxpayers navigate the tax code or receive better customer service, but to raise $100 billion in new revenues. It would have empowered 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.

While the removal of $40 billion in IRS funding from the Senate package is a win for taxpayers, President Biden and Congressional Democrats are pushing to include $80 billion in new funding for the agency in the partisan $3.5 trillion proposal that will be passed through budget reconciliation. This funding would add 87,000 new IRS agents that Biden claims will squeeze taxpayers for an additional $787 billion. 87,000 IRS agents could fill Nationals Park twice.

Any new IRS funding should be alarming given the IRS has a history of incompetence and corruption. In fact, just a few weeks ago, 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.

65 Percent of Voters say the IRS has Too much Power

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.

More IRS Funding Will Mean Thousands of New IRS Agents  

Legions of new IRS agents will be unleashed for invasive and time-consuming audits of middle class Americans and small businesses.   

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.]

Even Obama-era IRS chief John Koskinen – a longtime advocate of increasing the IRS budget – thinks President Joe Biden’s proposal to increase IRS funding by $80 billion is too much.  

As reported by the New York Times:  

“I’m not sure you’d be able to efficiently use that much money,” Mr. Koskinen said in an interview. “That’s a lot of money.”  

Rather than fix the agency's longstanding mismanagement, ineptitude and abuse problems, Biden's approach will make the problem worse.

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.

 

Under Biden, the IRS Will Snoop on Your Venmo Account, Bank Accounts, and more. 

The Biden administration also wants to sic the IRS on your Venmo account and bank accounts. As part of the proposal, banks and third-party payment providers, like Venmo and CashApp would be required to report ALL account holders’ aggregate account outflows and inflows to the IRS.  

President Biden claims that this proposal is designed to “crack down on millionaires and billionaires who cheat on their taxes.” However, it is unclear how monitoring Venmo accounts – many of which are held by younger Americans – contributes to this goal. The average Venmo transfer amount is $60 and is popular among young people, with over 7 million Venmo users belong in the 18-34 age group. For users who have undergone identity verification, the weekly spending limit is $7,000. These trends exist for most third-party payment providers. It is hard to see how millionaires and billionaires are using Venmo or CashApp to launder mass amounts of money.  

The IRS will use these powers against Americans of all income levels. Requiring banks and third-party payment providers to report this kind of information is an indefensible invasion of privacy. Giving the IRS access to this private information is a disaster waiting to happen.  

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 a recent 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.”

Photo Credit: Ted Eytan

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