As Congress prepared to vote on President Joe Biden’s $700 billion climate, tax and health care bill earlier this month, the head of the US tax collection agency Taxes sent a letter to lawmakers arguing for its passage.
Charles Rettig, commissioner of the Internal Revenue Service, knew that an $80 billion funding increase for the agency included in the bill was becoming one of the most controversial measures in the package among Republicans and rallied to his defence.
“We are the largest country in the world, but the agency that reaches more Americans than any other continually struggles to receive sufficient resources to fulfill its important mission,” said Rettig, who was appointed to the position by the former President Donald Trump.
“The IRS has been unable for too long to pursue meaningful and impactful examinations of large corporations and wealthy taxpayers to ensure they are paying their fair share,” he added.
The bill, including the IRS provisions, was approved by narrow Democratic majorities on Capitol Hill and signed into law by Biden. Since then, Republican outrage has grown, delivered in a steady stream of conspiracy theory-fueled accusations that the Biden administration was enlisting tax collectors to persecute political enemies as well as ordinary households and businesses.
These attacks escalated after Trump’s Mar-a-Lago estate was raided by FBI agents last week, as critics sought to link the two as similar instances of the same oppressive federal government. “Abolish the IRS,” Ted Cruz, the Republican senator from Texas, tweeted on Sunday.
“Are they going to have a strike force coming in with already loaded AK-15s ready to shoot a small contractor in Iowa?” asked Chuck Grassley, the veteran Republican senator from Iowa and longtime member of the Senate finance committee responsible for drafting taxes who is running for re-election this year, while speaking to Fox News this month.
“I think they’re going after middle-class people and small businesses because basically they think anybody with ‘pass-through income’ is a crook and not paying their fair share,” he said. he added, referring to corporate profits being deposited. on personal income tax returns.
The IRS has faced many political storms under various presidents. Richard Nixon was criticized in the 1970s for wanting the agency to step up its scrutiny of his political enemies. More recently, under Barack Obama, he was investigated for disproportionately challenging the tax-exempt status of conservative organizations.
Last year, the agency again came under fire from the right after the tax returns of some of the wealthiest Americans were leaked to ProPublica, the investigative news agency. Rettig has also come under attack from the left for not releasing Trump’s tax returns, despite pressure from Democratic lawmakers.
“The IRS has never been the king of the ball rolling among government agencies. It still ranks low in popularity,” said Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center. “People and politicians who reps don’t like the enforcement arm of the IRS.”
“These controversies are entirely fabricated, but they’re based on the age-old anti-tax hysteria that ‘the taxman is coming to get you,'” said Emily DiVito, senior program officer at the left-leaning think tank Roosevelt Institute.
Many tax experts have said an increase in IRS funding is overdue. According to the Center on Budget and Policy Priorities think tank, the IRS budget is 20% lower than its 2010 level when adjusted for inflation, while its full-time employees have shrunk by ‘a fifth. The audit rate dropped by 54% for large companies and 71% for millionaires. The “tax gap,” which measures the difference between taxes owed and taxes collected, is now about $600 billion a year, a Treasury official said.
Biden administration officials said the decade-long increase in funding would be used for technology upgrades, better customer service and additional staff, including replacing a string of retirees expected and increased audits of the wealthiest taxpayers. Over time, this would generate new revenue to pay bill expenses and reduce the budget deficit, they added.
They also pointed to it as crucial to restoring more fairness to U.S. tax administration after years of fears, particularly on the left, that the wealthiest corporations and individuals with offshore accounts and partnerships resorts received lax tax treatment and had lower compliance rates than those with middle-class families.
“There shouldn’t be a two-tier tax system,” said Natasha Sarin, adviser for tax policy and implementation at the US Treasury.
But the Republican attacks put the Biden administration on the defensive, forcing it to make it clear that the funding would not and should not be used for more audits on Americans earning less than $400,000 a year. Biden campaigned in 2020 pledging not to raise taxes on families earning less than $400,000.
“Contrary to misinformation from opponents of this legislation, small businesses or households earning $400,000 a year or less will not see an increased chance of being audited,” US Treasury Secretary Janet Yellen said in a statement. a letter to Rettig this month.
But Republicans, who have otherwise struggled to find ways to attack Biden’s latest economic package in a way that will resonate with Americans, were undeterred by pointing to those provisions as a primary political target and the issue is likely to remain a feature of midterm election campaigns. .
“When Joe Biden and his campaign promised the American people that ‘Oh, taxes weren’t going to go up for people earning less than $400,000,’ that was a lie,” Andy Barr told NBC on Sunday. Kentucky Republican legislator. . “This bill is going to come at the expense of the American people,”