As Democrats supercharged the IRS with billions of dollars in new funding and plans for an army of 87,000 new agents to go after Main Street workers and working families, they went out of their way to dismiss past abuses by the agency. Now, former Clinton Administration Treasury Secretary Robert Rubin and former Obama Administration Treasury Secretary Jacob Lew are doubling down on the myth that new funding for the agency, and hiring more agents than the number of personnel serving in the Coast Guard, will result in more revenue. Meanwhile, they ignore the abuses that happened on their watch.
The Biden Administration is misleading the public on the amount of taxes owed that aren’t being collected.
- The IRS’s numbers are highly disputed. Former IRS Commissioner Rettig testified before Congress that the tax gap could be as high as $1 trillion—contradicting the official IRS estimate of $381 billion per year. President Biden’s Tax Compliance Agenda uses an estimate of $630 billion.
- Worse, these estimates are outdated. All of these estimates are based on years-old data, including before a tax reform that simplified the tax code and improved compliance.
- IRS fell short with past funding increases: Despite the Biden Administration’s claim that more money will increase IRS audits and increase revenue from wealthy individuals and corporations, the Treasury Inspector General for Tax Administration actually found that despite using significant resources auditing large businesses, the IRS failed to bring in money to the Treasury from those audits nearly 50 percent of the time.
- We need a better approach. We need accurate data to find out where we should focus enforcement efforts to ensure taxes owed become taxes paid.
IRS abuses under both Secretaries Rubin and Lew resulted in congressional action to hold the agency accountable
- When Secretary Lew was in charge of Treasury and overseeing the IRS:
- Inappropriate use of taxpayer funds: An audit of the IRS itself, conducted from FYs 2010 – 2012 and published in 2013 found “inappropriate use of taxpayer funds being spent on conferences and reviews selected conferences to determine whether the conferences were properly approved, and the expenditures were appropriated.”
- Political targeting: Former IRS official Lois Lerner apologized in 2013 that Tea Party groups and other groups had been targeted for audits of their applications for tax-exemption, which effectively delayed that status until they could no longer take effective part in the 2012 election. The Treasury Inspector General found that “Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review” back in 2013.
- When Secretary Rubin was in charge of Treasury and overseeing the IRS:
- Raids of innocent taxpayers: In 1998, the Washington Post reported that “An Oklahoma tax-return preparer, a Texas oilman and a Virginia restaurateur told lawmakers how raiding parties of armed agents from the IRS Criminal Investigation Division barged into their homes or offices, frightened their employees and families — and ultimately came up empty-handed.”
- Political targeting: In 1997, CNN reported testimony from an expert that the IRS was “the best secret-keeping agency in our government today: “I discovered that the IRS does keep lists of American citizens for no reason other than that their political activities might have offended someone at the IRS; about how the IRS believes that anyone who offers even legitimate criticism of the tax collector is a tax protester; about how the IRS shreds its paper trail, which means that there is no history, no evidence and, ultimately, no accountability.” (Audio)
- This is just a sampling. For more, read: New Schumer-Manchin Bill Will Supercharge Long History of IRS Abuses
The supercharged IRS will go after the middle class and is already going after hairdressers, gardeners, and contractors.
- The Congressional Budget Office showed that the new IRS funding in the so-called “Inflation Reduction Act” will lead to more audits of families making less than $400,000.
- The analysis makes clear that audit rates will “rise for all taxpayers” and the policy “would return audit rates to the levels of about 10 years ago.”
- The Joint Committee on Taxation (JCT), Congress’s official tax scorekeeper, says that up to 90 percent of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only four percent to nine percent would come from those making more than $500,000.
- The IRS has already issued new reporting requirements designed by Democrats to ensure anyone who sells a couch or pays a babysitter electronically could trigger further IRS scrutiny if their online payments exceed $600. Legislation by Ways and Means Republican Rep. Carol Miller (R-WV) would stop this reporting requirement.
- Not only have Democrats voted against guardrails that would prevent the IRS from abusing middle-income earners with more audits, but Democrats are likely to revive their invasive bank surveillance scheme.