The IRS has a long history of incompetence and corruption. Now President Biden wants to give the IRS an additional $80 billion over the next decade, nearly doubling the size of the agency. This will mean more agents, more audits, and more political targeting.
Here are six reasons taxpayers should be concerned with the Biden plan to double the size of the IRS.
1. 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.
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.
2. 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.
3. 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.
4. Biden Would Repeal Step-Up in Basis, Creating a Second Death Tax and Giving the IRS More Opportunities to Harass Family-Owned Businesses.
The IRS has a history of harassing individual taxpayers and family-owned business including threatening to seize property and shut down businesses. Biden is proposing a second Death Tax which will give the IRS a new way to intrude in the lives of family owned businesses.
Repealing step-up in basis will disproportionately fall on family-owned businesses, many of which are asset rich, but cash poor. These businesses are already forced to liquidate structures, equipment, land, and other assets because of the Death Tax. Repealing step-up in basis will compound this problem and force family-owned businesses to sell a significant portion of their business or go into debt to pay their tax liability.
Repealing step-up in basis will also create new complexity for taxpayers. Because of this tax increase, taxpayers would have to determine the cost basis of all assets owned, many of which may have been owned for decades.
This Second Death Tax has already been tried and failed. In 1976 congress eliminated stepped-up basis, but it was so complicated and unworkable that congress voted to restore stepped-up basis.
As noted in a July 3, 1979 New York Times article, it was "impossibly unworkable":
Almost immediately, however, the new law touched off a flood of complaints as unfair and impossibly unworkable. So many, in fact, that last year Congress retroactively delayed the law's effective date until 1980 while it struggled again with the issue.
As noted by the NYT, intense voter blowback ensued due to the "nightmare of paperwork":
Not only were there protests from people who expected the tax to fall on them -- family businesses and farms, in particular -- bankers and estate lawyers also complained that the rule was a nightmare of paperwork.
Given that family-owned businesses already struggle to pay the Death Tax, it’s easy to see how a Second Death Tax could create serious complications.
5. 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.
The last thing the IRS needs is more power and responsibility. In fact, it’s likely that new responsibilities will become overwhelming for the IRS, leading to these new scandals and new cases of taxpayer abuse.
While the IRS continues to blame its poor performance on a lack of taxpayer funding, the real problem is the inability of the agency to competently complete basic tasks and spend taxpayer dollars in a responsible way. Biden’s plan to give the IRS $80 billion would do nothing to fix existing problems and would only exacerbate them.
6. 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:
“Due to the circuitous process implemented by Lerner, only one conservative political advocacy organization was granted tax-exempt status between February 2009 and May 2012. Lerner’s bias against these applicants unquestionably led to these delays, and is particularly evident when compared to the IRS’s treatment of other applications, discussed immediately below.”
When given more authority and money, the IRS will be given more opportunities to abuse its powers.