2024 Election Outcome May Determine IRS’s Fate
TL/DR –
The US Internal Revenue Service (IRS) is under scrutiny by Congress with disagreements on its handling of a multibillion-dollar investment. The Republicans argue that the IRS has failed taxpayers and wasted parts of the $80 billion investment Democrats pushed through in the Inflation Reduction Act. However, the Democrats acknowledge the agency’s progress and its effectiveness in closing the tax gap, increasing revenue, and improving customer service, with IRS Commissioner Daniel Werfel testifying that long-term funding will help shrink the federal deficit.
IRS $80 Billion Investment Sparks Partisan Debates in US Congress
Partisan disputes regarding the Internal Revenue Service’s (IRS) performance with its multibillion-dollar investment came to a head as commissioner Daniel Werfel testified before the House Ways and Means committee.
Republicans accused the IRS of failing taxpayers and wasting parts of the $80 billion Democrats secured through the Inflation Reduction Act. Democrats defended the IRS, praising its significant progress.
IRS Future Under Scrutiny as 2024 Election Looms
The IRS’s future could be significantly impacted by the 2024 election results, given its frequent targeting by the Republican-majority house. Republicans have repeatedly attempted to cut IRS funding to offset other governmental spending.
Republicans’ criticism of the IRS revolves around concerns over an unrequested IRS direct file scheme, the use of the $80 billion windfall, and revenue generation projections from increased audits, as expressed by committee chairman Rep. Jason Smith, R-Mo.
Contrarily, Democrats, such as Rep. Lloyd Dogget, D-Texas, argue that cutting IRS funding would enable corporate and high wealth tax evasion.
Closing the Tax Gap
Increased audits and long-term IRS funding aim to close the tax gap, which refers to legally owed but unpaid taxes. The tax gap has expanded due to a more complex tax code and outdated IRS technology and staffing.
Werfel argues that long-term funding will help close the tax gap, a position supported by the nonpartisan Congressional Budget Office and reports suggesting the federal deficit could be reduced as the tax gap decreases.
A 2022 CBO report estimated the IRA funding could increase revenues by over $180 billion from 2022 to 2031.
Improved Customer Service
The IRA funding has also improved customer service for taxpayers. A GAO report highlighted a 65% increase in answered calls and a reduction in average wait times from 28 to three minutes during the 2023 tax season.
Future IRS Funding
Future IRS funding could be influenced by the party controlling the White House. While President Biden supports long-term IRS funding, potential Republican nominee Donald Trump has proposed mixed IRS funding levels.
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