Tougher IRS enforcement central to economic package

After more than a decade of mostly losing out, the Internal Revenue Service may finally get the cash infusion it has long wanted in the economic package that Democrats are working furiously to push through Congress before their August break.

Under a deal worked out by Senate Majority Leader Chuck Schumer of New York and West Virginia Sen. Joe Manchin, the bill would spend an extra $79.6 billion on the beleaguered agency over the next 10 years. The plan would generate an additional $203.7 billion in revenue for the federal government over that timeframe, for a net gain of more than $124 billion, the Congressional Budget Office projects.

As the Senate prepares to begin voting on the bill in the coming days, the IRS proposal has become a magnet for GOP attacks, testing Democratic unity as they try to deliver on key climate and health care priorities ahead of the fall midterm elections.

Democrats say the IRS investment is needed to ensure that corporations and wealthier Americans pay what they owe in taxes. But Republicans are warning it will lead to increased scrutiny of small-business owners and others who are burdened enough.

The IRS has been mostly on the losing end of congressional funding fights over the past dozen years. In April, IRS Commissioner Charles Rettig told members of the Senate Finance Committee the agency’s budget has decreased by more than 15% over the past decade when accounting for inflation, and that the number of full-time employees at 79,000 in the last fiscal year was close to 1974 levels.

Fewer doing more

Enforcement staffing has been hit even harder, falling by some 30% since 2010, even though the filing population increased.

“Every measure that is important to effective tax administration has suffered tremendously in recent years, with profound deficiencies resulting from underinvestment in human capital and information technology,” Rettig said.

Sen. Tom Carper, D-Del., a longtime member of the Senate Finance Committee, said he hears the same thing from IRS commissioners every few years, regardless of whether they are serving a Republican or Democratic administration.

“They beg us to provide some resources to the IRS so they can do their job,” Carper said.

Democrats see an opportunity to change that:

• More than half of their proposed spending increase would go to enforcement.

• The next-biggest chunk, $25.3 billion, would go to operations support, such as rent, security and postage.

• Another $4.75 billion would go to improve callback services and other technology designed to improve customer service.

• And $3.2 billion would go to pre-filing and educational assistance.