More IRS funding aids in capturing rich tax evaders
TL/DR –
The Inflation Reduction Act of 2022 saw a provision for an $80 billion funding increase for the Internal Revenue Service (IRS), aimed at upgrading the agency’s systems and improving tax collection, particularly from wealthy individuals. The enforcement efforts resulted in over $1 billion in revenue from 1,600 delinquent taxpayers who earned over $1 million annually and each owed over $250,000. Despite Republican efforts to claw back the IRS budget increase, the IRS has made significant improvements, reducing wait times on their help line from 28 to three minutes and the funds are expected to generate hundreds of billions of dollars in additional revenue over the next decade.
The Inflation Reduction Act: A game-changer for the IRS
The controversial Inflation Reduction Act of 2022 raised eyebrows among Republicans by proposing an $80 billion funding increase for the Internal Revenue Service (IRS). Critics such as Sen. Chuck Grassley, R-Iowa and Sen. Ted Cruz, R-Texas warned of a significant increase in IRS agents targeting everyday Americans.
Contrary to these fears, Democrats argued that the increased funding would enhance IRS services, modernize outdated systems, and improve the collection of unpaid taxes, particularly from wealthy tax evaders. This would not only make the tax system fairer but also reduce the deficit.
In a recent development, the Treasury Department reported significant results from enhanced IRS enforcement efforts. A program targeting 1,600 high-income defaulters, who each owed more than $250,000, collected over $1 billion in revenue. IRS Commissioner Danny Werfel stated that these taxes were not disputed but had previously been uncollected due to limited resources.
Despite these positive results, Republicans have continued their attempts to curtail the IRS’s improved efficiency. During recent budget negotiations, they successfully lobbied for a reduction in the original funding increase, resulting in a revised increase of $60 billion.
Nevertheless, the IRS has made significant strides thanks to the IRA funds. Customer service has improved, with call wait times reduced from 28 to three minutes. Furthermore, the Treasury estimates that the IRA will yield hundreds of billions in additional revenue over the next decade, reducing future tax evasion.
Despite the improvements, conservative factions continue to criticize the funding increase, as reflected in the Project 2025 plan developed by Donald Trump’s allies. Trump’s own stance on tax evasion was revealed in a 2016 debate when he suggested that avoiding taxes was a sign of intelligence. Although wealthy tax evaders may find the enhanced IRS enforcement measures “intrusive”, the success of the IRA indicates that they are now less likely to evade their tax obligations.
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