The Senate “infrastructure” deal endorsed by President Joe Biden will give the IRS $40 billion in new taxpayer funding to audit and harass taxpayers including American families and small businesses. This new 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.

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. The Wall Street Journal rightly described this proposal as a “Bipartisan Pact to Supersize the IRS.”

This spending is also just the first step in the Democrat goal to dramatically expand the IRS. President Biden has proposed $80 billion in new funding for the agency and could include additional funding in a second piece of legislation that he wants Congress to pass through budget reconciliation.

New IRS enforcement 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. In fact, as noted by Donald Williamson, a tax professor at American University’s Kogod School of Business, small businesses are already disproportionately targeted by the IRS:

“… most audits are not random… the IRS has a secret algorithm for determining how likely each taxpayer is to have unreported income. Employing this calculus, the IRS has concluded that small businesses are less likely to be paying their fair share of taxes relative to much larger enterprises, a surprising conclusion in light of frequent press reports of multi-national corporations allocating billions of dollars of profits to no- or low-tax jurisdictions to avoid U.S. income taxation."

While this new funding will increase enforcement, there has been little or no mention of increasing the IRS’s woeful customer service.  Every year the IRS hangs up on millions of taxpayers calling for assistance – 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. Rather, the purpose of this funding is to literally squeeze more tax revenue out of the American people.  

Before giving the IRS a single new penny, the agency needs reform to ensure it is properly doing its job to help taxpayers navigate the tax code and is not targeting taxpayers or failing to protect sensitive data.

In recent years, there have been numerous cases illustrating how the IRS is corrupt or incompetent. For instance:

• A 2015 report compiled by the Senate Finance Committee found that Lois Lerner’s political beliefs led to tea party and conservative groups receiving disparate and unfair treatment when applying for non-profit status. 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.”

• A 2015 report by the House Oversight Committee found that the IRS destroyed 422 backup tapes containing 24,000 emails belonging to Lois Lerner. The tapes were magnetically “degaussed” despite an agency-wide preservation order and congressional subpoena. Degaussing is a process whereby powerful magnets are used to erase data on a storage tape.

• 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.    

• A 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 IRS has repeatedly failed to include required information on notices they send to taxpayers, thus eroding taxpayers’ ability to understand said notices, figure out the right office/number to correspond with, file appeals, etc.

• A 2020 National Taxpayer Advocate Report noted that the IRS union contract requires the agency to first consider internal applicants before hiring externally. This requirement leads to a “waste of time and resources” and often results in the agency “shuffling existing employees around.”

• The IRS is required by law to assign a single employee to each taxpayer’s case for mutually generated correspondence, and, in more cases than not, fails to do so.

• 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.

$40 billion in additional funding will lead to the increased harassment of small businesses and American families. It would also fund the incompetence and corruption that runs rampant within the agency. 

With a projected $4.4 billion in surplus revenue, Wisconsin Republicans are eager to give most of that extra cash back to the taxpayers. A new three-pronged proposal would cut $3.4 billion in taxes, in what would be the largest tax cut in the state’s history.

The most significant aspect of the plan would slash income tax rates for Wisconsin’s largest tax bracket – the middle class. Residents making between $23,930 and $263,480 will see their rates reduced by almost a full percentage point, from 6.27% to 5.3%.

That 15% rate cut translates to big savings for millions of Wisconsin families. According to the state budget office, those earning between $50,000 and $60,000 would save $172 on income taxes every year. Individuals and families will have more cash on hand to save, invest, and improve their lives.

“This is real, substantial and permanent tax relief that will forever change the state,” the MacIver Institute, a Madison-based think tank, noted in its analysis of the budget. “Not only will this tax cut keep taxpayers’ money where it should be, in their wallets, this tax cut will dramatically reduce the amount of taxpayer money available to fund state government. Let that sink in for a moment.”

The plan is also a boon to small businesses, particularly pass-through companies like sole proprietorships, LLCs, and partnerships. Since the majority of these businesses pay taxes under the individual income tax system, they would receive relief under Wisconsin Republicans’ tax plan, creating a greater incentive for entrepreneurs to do business in Wisconsin while increasing their job-creating capacity. Moreover, the proposed income tax cut would provide much-needed relief for existing small businesses that suffered under Governor Tony Evers’ pandemic lockdowns.

Homeowners also stand to benefit under the proposed tax cut, thanks to plans to lower property taxes by $647 million. For a median-priced Wisconsin home, that’s an extra $100 every year in tax savings. The cuts are a result of allocating an additional $647 million to the state’s general school aid fund, while maintaining spending caps for local K-12 districts and technical colleges. Those state funds effectively replace local property tax revenue, permitting property tax relief for Wisconsin homeowners. Reduced property taxes will also benefit renters, for whom the property tax burden is baked into their lease. 

For the third component of the tax cut, legislative Republicans in Wisconsin hope to abolish the personal property tax, which businesses currently pay on equipment and furnishings. The tax was scaled back in 2017, when Republicans controlled both branches of government, but new legislation could finally axe it for good. That proposal will head to the governor’s desk as a standalone bill. If it were included as part of the broader appropriations package, Governor Evers could weaken or eliminate it with his partial veto power, which gives the governor substantial authority to modify specific components of the budget. 

By killing the personal property tax in legislation separate from the budget, Republicans hope to force Evers to either accept or reject it in its entirety, rather than using a line-item veto in the budget.

The tax relief included in the budget has Wisconsin Democrats on the defensive. All four Democrats on the Joint Finance Committee voted against the legislation, pegging it as a tax cut for the rich since three-quarters of the income tax cuts would go to people earning more than $100,000. Yet the legislation would simply reduce taxes across the board in the state’s largest income tax bracket, including for most families earning between $30,000 to $40,000 a year. The vast majority of state residents will see real dollars returned to their wallets. In fact, the income tax rate would remain unchanged in the top bracket. Residents earning over $263,480 would still be taxed at 7.65%, the tenth highest rate in the country. That is something that Wisconsin legislators would do well to address at some point.

Republicans control both houses of the Wisconsin legislature. However, the budget still needs approval from Governor Evers, who vetoed a $250 million tax cut last year. It’s unclear whether the Republican proposal will become law, but next year’s elections are quickly approaching. Maybe some Democrats – and perhaps even the governor – will end up supporting a long-overdue tax relief package that benefits millions of middle-class Wisconsinites.

ATR President Grover Norquist released a letter in support of Congressman Dan Bishop’s (R-N.C.) new bill to codify the Trump administration’s Health Reimbursement Arrangements (HRA) rule. This will preserve healthcare freedom and choice by making sure that workers continue to have the option to purchase healthcare through an HRA as an alternative to relying on employer provided insurance.

This rule ensures that hundreds of thousands of Americans continue to receive health insurance coverage that they wouldn’t enjoy without HRAs. With more healthcare insurance choices also comes more competition, ultimately leading to better, more affordable healthcare in the United States. 

If they are serious about promoting innovation, driving down healthcare costs, and protecting consumer choice, lawmakers should co-sponsor and support this legislation.  

Read the full letter here or below:  

Dear Members of Congress:  

I write in support of Congressman Dan Bishop’s (R-N.C.) legislation to codify the Trump administration’s rule to expand the use of Health Reimbursement Arrangements (HRAs). Codifying this rule will promote employer flexibility and choice in the healthcare system. All members of Congress should support and co-sponsor this important piece of legislation.  

The HRA rule was finalized in 2019 and allows employers to offer HRAs to their employers to purchase insurance as an alternative to employer provided care. HRA funds are tax free to both the employer and employee and funds roll over year to year.  

This is especially valuable to small businesses and their employees, as, without, the ability to offer HRAs, they could be prevented or limited in their ability to offer high quality coverage to their employees. Not only does this leave employees without high quality coverage, but it also hurts employers’ ability to attract high quality applicants.  

Before the rule, more than 80 percent of employers offered their workers just one choice, so this rule allowed businesses more flexibility to offer their workers’ health insurance coverage. In fact, it is estimated that codifying this rule has and will help 11 million workers get this kind of coverage and 800,000 businesses offer this kind of coverage. This influx of covered Americans in the individual market will lead to more choice, lower premiums, stability, and innovation. Giving workers increased healthcare options also encourages competition which in turn can lower costs and encourage more quality care.

In addition, by giving employees more control over their healthcare dollars, the HRA proposal will increase healthcare transparency and put downward pressure on wasteful healthcare spending.  

HRAs will also complement existing tools to expand healthcare choice as they can be used in conjunction with a Health Savings Account-qualified plan to pay for premiums, dental care, and other expenses. 

Congressman Dan Bishop’s legislation to codify Health Reimbursement Arrangements (HRAs) will ensure millions of working families continue to have access to these accounts. This will preserve healthcare freedom and choice by making sure that workers continue to have the option to purchase healthcare through an HRA as an alternative to relying on employer provided insurance. 

Onward,  

Grover G. Norquist  

President, Americans for Tax Reform 

Ohio legislators are hard at work combining the House and Senate versions of the biennial state budget. Both include some great provisions, including income tax cuts that should be prioritized.

The Senate budget features a 5% income tax cut, and the House offers a 2% income tax cut. These reductions offer needed relief for Ohio families and businesses – particularly as they recover from the pandemic.

The state legislature’s continued focus on tax relief for Ohioans is extremely important as the state features some of the highest and most numerous local taxes. These local jurisdictions add complexity on top of the cost of the taxes themselves, making it more difficult for businesses to make ends meet.

While commercial lease tax reform remains a white whale in the Buckeye State, further income tax relief would be a big help for taxpayers.

On top of the tax cuts, legislators in both chambers want to address the issue of cities trying to tax people who are working from home outside of the city where their office is based.

During the pandemic, many workers have not set foot in their offices. But the cities that are home these offices, who locked down, still want to collect income tax from these workers. While this issue has resulted in legal challenges, legislators want to allow work-from-home folks to get tax refunds from the city where their office is based.

A Senate proposal would address the wasteful, ineffective practice of local government using taxpayer dollars to try and operate broadband networks. Senators want to bar localities from starting these often ill-fated enterprises.

Legislators also may still vote on sports betting legislation before June 30th. The bill includes very competitive tax (10% tax rate on bets) and regulatory policies that will enable Ohio to compete with their neighbors in Indiana, Pennsylvania, and Kentucky, all of which have legalized sports wagering.

As the House and Senate work out a final budget, they should maximize income tax relief, and protecting Ohio taxpayers from wasteful government broadband.