IRS cuts make Uncle Sam lose money — Reducing the enforcement budget is bad policy

No one loves the Internal Revenue Service, but we need the much-maligned agency having enough resources to make sure that everyone pays their fair share of taxes to support Uncle Sam and Republicans should not slash that funding.

For a brief moment, the IRS had the full breadth of resources it needed to investigate wealthy tax cheats, courtesy of President Joe Biden’s Inflation Reduction Act.

Now, most of this funding, exceeding $40 billion, is at risk in a proposed continuing resolution to keep the government open. This is a loss for fiscal responsibility.

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

Every serious study of the effect IRS funding levels have on receipts shows that the increased tax revenues they generate far outstrip the initial spend, i.e. spending more on the IRS always brings in more money.

It’s also not money that’s coming out of already-stretched families’ pockets, as the fear mongers would have you believe. If anything, the opposite is true, as the IRS has used a chunk of the additional cash to improve services for taxpayers, hiring additional customer service personnel and modernizing systems to help people navigate the sometimes byzantine agency.

The additional enforcement capacity this funding allows was never intended to and has not targeted the vast majority of U.S. taxpayers, with the agency having said from the get-go that audits would not increase for people earning under $400,000 annually.

Instead, the agency has specifically focused on very high net worth individuals and large companies, with an emphasis on those who’ve not been timely filing taxes or otherwise draw particular scrutiny in ways the agency simply hasn’t had the resources to fully investigate.

Even just this past fiscal year, the agency secured some $25 billion in additional revenue from audits as compared to the year before, and it estimated it could collect up to $561 billion more over the next 10 years. This isn’t some abstraction, this is real money that can be used to fix bridges, keep Medicare solvent, support housing development and financing, respond to health emergencies and natural disasters and so on.

The fantasy that some political actors painted of armed IRS agents going door-to-door clawing away families’ hard-earned cash obviously never materialized, yet Republicans are coming after the funding anyway, because ultimately they have a powerful constituency of moneyed interests to protect.

They’re getting this goal in part due to their own inability to negotiate a budget, as these are concessions that Democrats made in order to avoid a government shutdown.

For their part, Democrats might have considered this kind of a moot issue with the incoming Trump administration and a GOP-controlled House and Senate — why fight for something that the Republicans are just going to take out in a month?

Perhaps, but we wouldn’t be so sure; Speaker Mike Johnson will be heading into the next session with about as slim of a majority as is possible. The defection of just a handful in his ranks will tank the chance of a controversial bill passing, and we have to imagine there are at least a few Republican lawmakers who understand this to be pure form over substance in a way that will ultimately hurt and not help taxpayers.

— New York Daily News Editorial Board