Inflation Reduction Act May Enable IRS to Collect $561B: Treasury
A new Treasury Department analysis suggests that the IRS could turn nearly $80 billion in funding from the Inflation Reduction Act into $561 billion in overdue and unpaid taxes collected over the next decade. This estimated revenue could potentially rise to $851 billion if the funding is renewed after it expires in 2031. However, the Treasury warns that if $20 billion is cut from the IRS’s funding allotment, revenues could shrink by over $100 billion and could reverse taxpayer service improvements and endanger near-term enforcement efforts.
New Analysis: IRS Could Collect $861 Billion from Inflation Reduction Act Funding
The IRS could transform the nearly $80 billion in funding acquired via the Inflation Reduction Act into $561 billion in collected overdue taxes over the next decade, according to a Treasury Department analysis.
Actual revenues could reach $851 billion if the Act’s funding is renewed post-2031. But a $20 billion cut in IRS funding may result in a $100 billion drop in revenues. Treasury indicates that such cuts could end IRS enforcement funding by 2029, affecting revenue and endangering enforcement efforts.
Treasury’s report clarifies that past Inflation Reduction Act revenue estimates didn’t consider the full revenue benefits of innovative investments. It stresses the need for a comprehensive view of revenue collection that includes improving services, modernizing technology, and adopting advanced analytics for productivity.
Using a comprehensive approach to revenue collection, the IRS could generate total revenue of $851 billion from investments in its technology, data analytics, and taxpayer services. “The IRA investment, if sustained, will raise $851 billion over FY 2024-2034,” the report states.
As well as its FY 2023 annual appropriation of $12.3 billion, the IRS received approximately $79.4 billion over ten years from the Inflation Reduction Act. Of this, $1.4 billion was rescinded by lawmakers as part of debt ceiling negotiations, with another $20 billion earmarked for cuts.
National Economic Adviser Lael Brainard stated, “President Biden’s investment in rebuilding the IRS will reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe.”
The Act’s investments in the IRS are due to a decade of deep funding cuts from Congress that resulted in unacceptable service levels, prevented technological updates, and undermined enforcement, particularly against wealthy individuals and large corporations. The tax gap—the discrepancy between taxes owed and paid—reached $688 billion in 2021.
Due to modernization efforts using the Inflation Reduction Act funding, the IRS has recovered roughly $482 billion in back taxes since last October.
Read More US Economic News