WASHINGTON, D.C. – Top Republican on the Ways and Means Select Revenue Measures Subcommittee Rep. Adrian Smith (R-NE) and top Republican on the Oversight Subcommittee Rep. Mike Kelly (R-PA) opened today’s hearing on the supposed ‘tax gap’ by highlighting how Democrats’ tax-and-spend agenda puts America last.
In discussing President Biden’s push for a higher tax burden on Main Street businesses, Rep. Smith said:
“The Administration’s proposals to repeal stepped-up basis and tax capital gains cover for the fact that they have chosen to pursue a punitive capital gains rate, in the name of “fairness,” instead of one that maximizes revenue or economic activity.
“And now, today, we are reviewing President Biden’s proposal to install 90,000 new government bureaucrats to harass American small businesses, farmers, and ranchers, because he finds unfairness in the fact that our tax code provides various options for how to organize and pay taxes as a small business, just as most modern economies do.”
In discussing the supposed ‘tax gap,’ Rep. Kelly said:
“Every American should pay all the taxes they owe, and the IRS should conduct smart and efficient tax enforcement.
“But throwing $80 billion at the problem without a clear plan or a clear demonstration that the agency can use that money effectively is not the right approach…
“It baffles me that the Administration is asking for $80 billion for enforcement when there are over a million 2019 tax returns still unprocessed and millions more held up in error resolution.”
If we want to rebuild the economy, it’s time to stop Biden’s “all spending, no growth” approach.
- The Tax Foundation reports that Biden’s endless emergency spending will result in 101,000 fewer U.S. jobs.
- Biden’s budget lands on the backs of middle-class working families in lower paychecks, sends jobs overseas, and means less investment in local communities.
Republican Tax Reform helped all Americans.
- The Tax Cuts and Jobs Act (2017) raised income for Americans at every income level and brought unemployment to a 50-year low.
- Unemployment among African American and Hispanic workers reached all-time lows under TCJA.
- After tax reform, wage growth was the fastest in a decade and the fastest for the lowest quartile of workers.
Biden’s tax hikes and spending land on American workers in higher prices, less jobs.
- Americans are already paying the price for Biden’s endless spending in inflation, with prices jumping at the fastest pace in 13 years.
- Biden’s stealth tax – inflation – disproportionately hurts low-income working Americans.
Rep. Smith’s opening remarks as prepared appear below.
Thank you, Mr. Chairman, for the time.
I appreciate that we’re taking this time to further investigate the administration’s tax enforcement proposals, and their potential impact on our economy.
We agree it is fundamentally unfair to believe Americans who pay their taxes accurately and on time, but some people don’t.
Our system of voluntary compliance works because Americans believe their friends and neighbors are also following the rules.
Our system should recognize that by not further burdening the families, farmers, ranchers, and small businesses who already put substantial time and resources into following the law.
We should work in a bipartisan fashion to find ways we can better track down those who cheat the system without undermining bipartisan successes in bringing accountability to the IRS, like the Taxpayers First Act.
That said, I come into this hearing with concerns about President Biden’s compliance proposal on a number of fronts.
I’m very skeptical about the IRS’ projected return on investment. The administration is promising to bring the nearly three quarters of a trillion dollars over the next decade, with its proposal.
Their estimate relies on an assumption that $80 billion in new funding would raise more than five times that in newly collected revenue.
However, the Congressional Budget Office has previously estimated a two and a half to one return rate on original IRS enforcement, which would net only about $200 billion, or 200 billion from those dollars.
Second, I have serious concerns about establishing a mandatory funding stream for the IRS.
We have a strong track record in Congress of establishing and sticking to pathways for more predictable funding for agencies, whether it’s pre-funding the Department of Veterans Affairs, or Corporation for Public Broadcasting, or working to double NIH funding over time.
I’d be glad to work with appropriators in a bipartisan fashion to find a way to give IRS and other agencies more long-term certainty so they can plan for their staffing needs.
At the same time that certainty could come through regular appropriations to ensure we continue to have proper oversight of the agency when issues arise, whether it is printers without toner, or rogue employees leaking taxpayer data to the press.
We should also keep in mind any time we ask the IRS to devote resources to mailing monthly checks or providing insurance subsidies, those are resources that can go to enforcement or customer service.
My biggest concern, however, is that this proposal falls in line with other problems with the President’s tax agenda, all of which I would characterize as, quote, fairness run amok, end quote.
As we discussed in our last SRM hearing, the administration’s proposals to repeal stepped up basis, and tax capital gains cover for the fact that they have chosen to pursue a punitive capital gains rate, in the name of fairness, instead of one that maximizes the revenue or economic activity.
The G-7 minimum corporate tax proposal engineered by Secretary Yellen, only serve as cover for the administration’s desire to hike our corporate tax rate in the name of supposed fairness, instead of recognizing the corporate tax reform, under the Tax Cuts and Jobs Act made the United States a more desirable place to create jobs, while also stopping corporate inversions.
And now, today, we are reviewing President Biden’s proposal to install 90,000 new government bureaucrats to harass American businesses, farmers and ranchers, because he finds unfairness in the fact that our tax code provides various options for how to organize and pay taxes as a small business, just as most modern economies do.
While it is easy to understand why the President might think the only reason to set up an S corporation is to avoid Medicare taxes on book royalties or speaking fees, that is not the primary reason why small businesses organize themselves in that way.
There are areas where we can work together in a constructive way to modernize enforcement of our tax code. For example, by setting specific and clear, consistent rules and procedures for the taxation of cryptocurrency in a manner which doesn’t discourage American innovation in this new industry.
That should be our focus.
Thank you again, Mr. Chairman, I’m looking forward to the administration explaining their proposal, and to hear varying perspectives on it.
I yield back. Thank you.
Rep. Kelly’s opening remarks as prepared appear below.
Good afternoon, Mr. Chairman. Thank you for holding a hearing today on the tax gap.
I want to begin by addressing the news this week of an unacceptable and criminal leak of confidential taxpayer information to ProPublica.
ProPublica claims that it was provided “a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years.”
This shocking breach of taxpayer privacy should cause serious concern for every member of Congress and frankly for every American taxpayer.
This is the second high-profile unauthorized disclosure of taxpayer information to the press in less than a year.
If this can happen to the wealthiest Americans or even the President of the United States, it could happen to any American taxpayer.
I’d like to hear from our IRS and Treasury witnesses today about what is being done to get to the bottom of this and make sure that any IRS employee that leaked this information is prosecuted.
With that, let me turn to the tax gap and tax enforcement.
Commissioner Rettig recently cast doubt on the accuracy of the IRS tax gap estimate.
This concerns me because we need an accurate tax gap estimate to be able to make informed policy choices.
I look forward to hearing from our witnesses today about what the IRS is doing to develop a more accurate and more timely tax gap estimate.
The only way to know whether we are closing the tax gap is to have an accurate way to measure the tax gap.
I’m sure today’s hearing will also address President Biden’s tax enforcement plan.
My understanding is that the Administration wants to pour $80 billion into the IRS over ten years for enforcement.
This will include the hiring of something like 87,000 new IRS employees over the same time period.
Every American should pay all the taxes they owe and the IRS should conduct smart and efficient tax enforcement.
But throwing $80 billion at the problem without a clear plan or a clear demonstration that the agency can use that money effectively is not the right approach.
The Administration’s claim that it will be able to audit its way to $700 billion in new revenue over ten years sounds like fantasy land to me.
I was proud to work with the late John Lewis on reforming the IRS through the bipartisan Taxpayer First Act.
That law was designed to focus the IRS on serving American taxpayers and providing excellent customer service.
Most Americans want to pay the taxes they owe but have a hard time when questions arise and they can’t get through to the IRS to get help.
We need to make it easier, which is why we required the IRS to create a customer service strategy in the bipartisan Taxpayer First Act.
The Biden plan seems to turn its back on that approach. Instead the Administration seems to want to turn back the clock by building an army of IRS agents that will seek to squeeze every dollar possible out of the American people.
It baffles me that the Administration is asking for $80 billion for enforcement when there are over a million 2019 tax returns still unprocessed and millions more held up in error resolution.
I have constituents still waiting on refunds that they should have received a year ago. And there are millions of taxpayers across the country waiting on the IRS.
We have a taxpayer service crisis at the IRS and all the Administration can talk about is enforcement.
And of course, we need to improve IRS enforcement too.
There are smart and targeted ways we can do that.
We should work together to solve these problems just as Mr. Lewis and I worked together on the Taxpayer First Act.
A partisan spending spree is not the way to get the job done.
In closing, I want to thank our witnesses for being here today.
With that, I yield back.