Opinion: IRS cuts cause Uncle Sam to lose money – cutting enforcement budget is bad policy

Nobody loves the Internal Revenue Service, but we need the much-maligned agency to have enough resources to ensure everyone pays their fair share of taxes to support Uncle Sam, and Republicans shouldn’t cut those funds.

For a brief moment, thanks to President Joe Biden’s Inflation Reduction Act, the IRS had the full range of resources it needed to investigate tax fraud among the wealthy.

Now the bulk of that funding, totaling more than $40 billion, is at risk under a proposed continuing resolution to keep the government open. This is a loss for financial responsibility.

Republicans call these cuts “savings,” but every analysis shows a significant drop in revenue for the federal government.

Any serious study of the impact of IRS funding on revenue shows that the increased tax revenue it generates far exceeds the original expenditure, i.e. more spending for the IRS always brings in more money.

Nor is it the money that comes out of the pockets of already overburdened families, as the fear mongers would have you believe. If anything, the opposite is true, as the IRS has used some of the extra money to improve services for taxpayers, hire additional customer service staff and modernize systems to make it easier for people to navigate the sometimes complicated agency.

The additional enforcement capacity enabled by this funding was never intended to, nor was it intended to, target the vast majority of U.S. taxpayers, as the agency had stated from the outset that the audits would apply to people making less than $400,000 per year , would not increase.

Instead, the agency has focused specifically on ultra-high-net-worth individuals and large corporations, with an emphasis on those who didn’t file their taxes on time or were otherwise subject to special scrutiny, so the agency simply didn’t have the resources to do one carry out a comprehensive investigation.

In the last fiscal year alone, the agency secured around $25 billion in additional audit revenue compared to the previous year and estimates that it could collect up to $561 billion more over the next decade. This is not an abstraction, this is real money that can be used to repair bridges, maintain Medicare solvency, support housing development and financing, respond to health emergencies and natural disasters, and so on.

Some political players’ fantasy of armed IRS agents going door-to-door and taking families’ hard-earned money obviously never came to fruition, but Republicans are targeting the funding anyway because, after all, they have a powerful constituency have to protect financial interests.

They are achieving this goal in part because of their own inability to negotiate a budget because of concessions that Democrats made to avoid a government shutdown.

Democrats, for their part, might have viewed this sort of issue as a moot point given the new Trump administration and a Republican-controlled House and Senate — why fight for something Republicans won’t eliminate for another month?

Maybe, but we wouldn’t be so sure; Speaker Mike Johnson will go into the next session with as narrow a majority as possible. The departure of just a handful from its ranks will reduce the chance of passage of a controversial bill, and we have to imagine that there are at least a few Republican lawmakers who understand that form is more important here than substance, namely in a way that will ultimately hurt and not help taxpayers.