[Congressional Record Volume 169, Number 7 (Monday, January 9, 2023)]
[House]
[Pages H76-H94]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FAMILY AND SMALL BUSINESS TAXPAYER PROTECTION ACT
Mr. SMITH of Nebraska. Mr. Speaker, pursuant to House Resolution 5, I
call up the bill (H.R. 23) to rescind certain balances made available
to the Internal Revenue Service, and ask for its immediate
consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 5, the bill is
considered read.
The text of the bill is as follows:
H.R. 23
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Family and Small Business
Taxpayer Protection Act''.
SEC. 2. RESCISSION OF CERTAIN BALANCES MADE AVAILABLE TO THE
INTERNAL REVENUE SERVICE.
The unobligated balances of amounts appropriated or
otherwise made available for activities of the Internal
Revenue Service by paragraphs (1)(A)(ii), (1)(A)(iii),
(1)(B), (2), (3), (4), and (5) of section 10301 of Public Law
117-169 (commonly known as the ``Inflation Reduction Act of
2022'') as of the date of the enactment of this Act are
rescinded.
The SPEAKER pro tempore (Mr. Rouzer). The bill shall be debatable for
1 hour, equally divided and controlled by the majority leader and the
minority leader, or their respective designees.
The gentleman from Nebraska (Mr. Smith) and the gentleman from
Massachusetts (Mr. Neal) each will control 30 minutes.
The Chair recognizes the gentleman from Nebraska.
General Leave
Mr. SMITH of Nebraska. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days in which to revise and extend their
remarks and include extraneous material on the bill currently under
consideration.
[[Page H77]]
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Nebraska?
There was no objection.
Mr. SMITH of Nebraska. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, the process for considering our first bill of the 118th
Congress reflects our commitment to Americans and an open legislative
process.
Congresswoman Michelle Steel and I first introduced this bill in
September. Members were given more than 72 hours' notice prior to
today's consideration.
Mr. Speaker, 72 hours is more than enough time for Members to review
this bill. In fact, it is two pages long and covers only one topic.
If Members wish to vote on this bill, they must be present in the
House Chamber because proxy voting is no longer an option.
Now let's focus on what this bill does--it repeals the vast majority
of the Internal Revenue Service funding Democrats enacted last year in
order to pay for their Green New Deal.
The primary purpose of that funding is hiring more auditors and
support staff to vastly expand IRS's audit capacity. And not just
audits on wealthy Americans. With that expanded capacity, IRS can bring
in more revenue by auditing more middle- and lower-income families and
more small businesses.
Families and small businesses are struggling under the weight of
record inflation and supply chain shortages. Small businesses are
struggling to find workers at any wage.
The overwhelming majority of Americans, about 85 percent, follow the
law and pay their taxes. The last thing they need is more IRS agents
knocking on doors to conduct audits.
Yet, this IRS funding is part of the broad Biden administration
strategy to tax and audit exponentially more Americans by looking into
their bank accounts, requiring online payment services to report them
when they split a dinner check with friends or pay their babysitter
after a night out, and then target them using 87,000 new IRS employees.
Americans deserve to know their government is working for them, not
against them.
Today, Mr. Speaker, you are going to hear Democrats claim there
really won't be 87,000 new IRS employees. I imagine that they will say
that new employees aren't going to target middle-class families and
small businesses, and that Republicans don't care about IRS's customer
service failings.
Let's focus on the facts. When a Federal agency hires a new employee
to replace one who retires, it does not increase the agency's head
count. Yet, the Biden administration's own documents say they are
increasing the head count by 87,000 over the next decade with these
funds.
Secretary Yellen's own instructions to IRS stated audit rates of
families earning less than $400,000 should continue to be audited at
historically similar rates. Under those instructions, 9 out of every 10
new audits can target families earning less than $400,000.
And because Republicans are committed to delivering a government that
is accountable, this bill retains funding for customer service and IT
modernization at IRS--despite the fact these accounts would be more
appropriately addressed through regular appropriations--to ensure IRS
has the resources to make much-needed improvement to taxpayer services.
Mr. Speaker, there are numerous reasons to support this bill. It
protects families and small businesses. It ensures agencies are funded
appropriately. Most importantly, it stops autopilot funding for an out-
of-control agency that is perhaps most in need of reform. IRS needs to
fix its customer service and return processing problems, not focus on
auditing families and small businesses.
Americans want an IRS that works for them, not against them.
This bill is a great first step in that direction, and I reserve the
balance of my time.
Mr. NEAL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in strong opposition to H.R. 23. My friend from
Nebraska suggested a number of issues that we intend to challenge
during the course of the next half hour, based upon the facts.
This is theater tonight, Mr. Speaker. If we didn't get enough of the
entertainment factor last week, we are going to proceed with it again
this evening.
Mr. Speaker, 87,000 IRS agents, let me debunk that right away. There
are regular retirements of up to 8,000 a year, we are replacing them.
How about the methodology of a computer upgrade, an investment in
technology, more modeling, or should we have an IRS that operates the
way Southwest Airlines did last week--to the dismay of the American
family.
This is a messaging bill, Mr. Speaker. The message that they choose
to send--and let everybody understand this, the first bill that they
have submitted, according to the Congressional Budget Office, adds $114
billion to the Federal deficit. Legislation number one.
They don't want a fairer tax administration. They think it is bad for
some of their supporters. You know what they're attempting to do
tonight is bad for middle-class families, it is bad for small
businesses, who are then asked to pay more when the people at the top
don't pay their fair share.
Mr. Speaker, I include in the Record a letter from Charles Rossotti,
the former IRS Commissioner.
March 1, 2020.
Hon. Richard Neal,
Chairman, Committee on Ways & Means,
House of Representatives, Washington, DC.
Dear Chairman Neal: I was IRS commissioner from 1997 to
2002. At the time, Congress passed a major bill that produced
some important, long-lasting reforms, including converting
the IRS to electronic filing and improving treatment of
taxpayers.
I believe there is a major modernization opportunity today
that could efficiently recover a large amount of revenue. It
could gradually shrink the tax gap, while also easing burden
for millions of taxpayers who interact with the IRS.
I am enclosing my article in Tax Notes, entitled ``Recover
$1.6 Trillion, Modernize Tax Compliance and Assistance,''
which explains this opportunity.
I would be happy to talk further to you or your staff about
this opportunity.
Sincerely,
Charles O. Rossotti,
Commissioner of Internal Revenue, 1997-2002.
____
[From Tax Notes Federal, Mar. 2020]
Recover $1.6 Trillion, Modernize Tax Compliance and Assistance
(By Charles O. Rossotti)
I. The Problem
Last year the federal government failed to collect $574
billion of taxes that were legally due but not paid. That's
equal to more than half the budget deficit and, remarkably,
is equal to more than all the income taxes paid by 90 percent
of individual taxpayers.
No business would tolerate such a gigantic financial loss,
so why is it accepted in the government?
Columnist George Will captured a widespread view when he
recently wrote that ``shrinking the tax gap . . . is a
decades-old aspiration in Washington that would have been
accomplished already if it were possible.''
This resignation in the face of massive revenue loss is a
self-fulfilling prophecy. The perception that nothing can be
done to reduce the loss rationalizes inaction, which allows
the loss to grow year after year.
The tax gap has indeed been around for a long time, but
very little has been done to fix it.
As the economy and the tax system have become bigger and
more complex, the resources provided to the IRS have been
regularly cut. These cuts have been made in small but steady
increments over the past 25 years. They have served in some
ways to validate complacency about the tax gap, which, while
growing in dollar amount, has remained relatively constant as
a percentage of taxes due. The implicit conclusion of many
observers is, ``If IRS budgets can be cut and the IRS
continues to maintain the status quo, maybe nothing the
IRS does really makes much difference.'' That conclusion
is demonstrably false.
Most taxes continue to be collected without IRS
intervention for two reasons: First, most taxpayers have no
choice but to pay because their taxes are withheld or their
income is clearly reported; and second, about 85 percent of
the public has a positive attitude toward tax compliance.
These factors still allow a substantial proportion of
taxpayers to fail to pay what they owe, producing an ever-
increasing tax gap.
In the limited number of cases in which the IRS audits
returns, it directly collects additional revenue that exceeds
the cost of enforcement. A recent study by Natasha Sarin and
Lawrence Summers showed that revenue collected from audits
declined proportionately as audits were reduced. Taking a
broader, top-down view, IRS enforcement
[[Page H78]]
activities in fiscal 2017 produced $56 billion in revenue, of
which $12 billion was from auditing, while the entire IRS
enforcement budget was $4.7 billion.
Although traditional IRS enforcement activities do produce
revenue that reduces the tax gap, these results are not
entirely inconsistent with the perception that there is no
way to make a big reduction in the gap. Again taking a top-
down view, if all of IRS auditing produces $12 billion of
revenue, doubling the audit rate would reduce the current tax
gap by only about 2 percent if the revenue increase were
proportionate. While an extra $12 billion of revenue per year
would be considered a big gain on almost any scale, it is
only a dent in the massive amount of the tax gap.
Although not a justification for failing to do more with
traditional means to recover taxes from those who don't pay,
these facts emphasize the importance of new approaches to
shrink the tax gap. This report proposes a program, Tax
Compliance and Assistance 2020 (TCA 2020), to put the tax gap
on a reliably declining path, recovering an estimated $1.6
trillion over the first 10 years while also improving service
to all taxpayers.
ii. a new approach
TCA 2020 proposes two major reforms: adding third-party
reporting of some income that is not now reported, and using
new technology to transform the IRS compliance and assistance
process.
Because the biggest part of the tax gap is from income
that's not reported to the IRS by third parties, some
additional reporting will help identify the missing income.
However, the IRS today cannot use all the information it
already receives, and significant areas of noncompliance are
barely addressed, so more reporting alone will not solve the
problem.
New technology will make it possible for the IRS to rapidly
assess all returns and sources of information, identify
likely areas of noncompliance, and assist in efficient
follow-up. It will gradually transform the IRS process for
compliance and taxpayer assistance.
This new approach will improve the way millions of
taxpayers interact with the IRS, and no additional reporting
would be required for individuals who receive modest income
from sources like home businesses or driving.
This proposal does not require the invention of new
technology, but rather application of new methods already
used in government and industry, including methods used on a
limited scale in the IRS today.
This proposal is based on more than 50 years of business
and government experience that I gained as a company founder,
CEO, director of 20 public and private companies, IRS
commissioner, and member of President George W. Bush's tax
reform panel, and through service on nonprofit boards and
government committees. Almost all of these ideas have been
previously advanced in some way by others, but TCA 2020 is my
own integration of those ideas with practical ways to
implement them. I was ably assisted in this work by Michael
Udell of the District Economics Group and other experts in
tax and technology.
iii. summary of estimated results
If these proposals were implemented starting in 2020, we
estimate the results would be as shown in the Estimated
Results table. The method and details are provided in
Appendix A, Exhibit 1, to this report, which is available on
our website.
As the new proposals are implemented, the gain would
steadily increase, reducing the unmitigated tax gap by about
29 percent in the 10th year and gaining a 10-year total of
about $1.6 trillion. In subsequent years, the gain would
continue to grow both in dollars and as a percentage of the
unmitigated gap.
This new approach to address the tax gap would not require
a proportional increase in the IRS budget. We estimate that
the revenue gained would be 16 to 33 times the additional
cost to implement it.
iv. understanding the tax gap
The tax gap is not a result of a taxpayer's judgment or
interpretation of the tax code. It's a matter of many
taxpayers not paying all of what they legally owe, and the
government allowing that noncompliance to continue.
The tax gap therefore constitutes a large loss of revenue
that's not intended by the tax code. It is intrinsically
unfair, because it's a financial advantage that only
noncompliant taxpayers receive.
An IRS study of tax returns filed from 2011 to 2013 found
that the net tax gap per year was $381 billion. This is the
amount that should have been paid under the law but wasn't,
even after IRS enforcement efforts. The tax gap grew to an
estimated $574 billion in 2019, applying the same ratios of
income as in the last IRS study.
This huge revenue loss doesn't even include revenue lost
from large corporations that skillfully exploit the many
arcane provisions of the tax code to reduce their taxes but
usually remain in technical compliance. Only 5 percent of the
IRS estimate of the tax gap was from large corporations.
In the years studied, after IRS enforcement, about 14
percent of the amount that taxpayers initially failed to pay
was eventually collected. The remaining 86 percent represents
an opportunity to increase revenue solely from taxpayers who
should have paid anyway.
Unfortunately, the fraction of revenue recovered from the
tax gap has remained low and stable for many years. Although
some revenue could be gained simply by doing more auditing,
substantial progress will require new methods, which are
possible today only because of advances in technology.
A. Unreported Income by Individuals
The largest source of the tax gap is from individual
taxpayers who fail to report all the income they receive from
a business they own, rather than income they receive from
others as wages, interest, or dividends.
The key difference between these sources of income is that
income reported to both the IRS and the taxpayer by payers
such as an employer or bank is easy for the taxpayer to
report accurately and for the IRS to verify.
The stark difference in compliance accuracy depending on
the degree of independent reporting is shown in Figure 1 from
the IRS compliance study.
As also shown in the figure, it's not necessary to have
perfectly accurate reporting to make a big difference in
compliance accuracy. Of income that is subject to little or
no reporting, 55 percent is not reported, while only 17
percent of income that is subject to some reporting is not
reported.
Nor is it necessary for the IRS to increase reporting about
taxpayers who earn small amounts of business income from
occasional business activities like babysitting and home
businesses.
Sole proprietor income constitutes the majority of income
in the low-visibility category. Taxpayers with less than
$25,000 in sole proprietor business income comprise about 70
percent of the returns but represent only 14 percent of
reported income and a somewhat greater proportion of the tax
gap from underreported income.
TCA 2020 recommends that these small-income taxpayers be
exempt from any increased reporting requirements.
Taxpayers with more than $25,000 of business income would
be required to report to their bank and on their returns the
bank account or accounts in which their business income is
deposited. Taxpayers who had only income that's already
reported to the IRS by employers, banks, or customers (on
documents such as the familiar Form W-2 or Form 1099)
wouldn't have to do anything except check a box on their
return.
The banks that were designated by taxpayers as receiving
their business income would be required at year-end to
provide the taxpayer and the IRS with a summary report of
deposits received and disbursements made in these accounts,
including those from credit card payments. This would be a
report similar to the Form W-2.
The taxpayer would attach a schedule to the tax return
reconciling the total amounts reported by the bank with the
income and expenses reported on the tax return. For example,
if the cash received in the bank account was greater than the
amount reported on the return, the schedule would itemize the
difference. The IRS would design a form for this
reconciliation schedule that any bookkeeper could complete.
This process wouldn't require taxpayers to change anything
about their banking arrangements and wouldn't restrict any
banking transactions. Taxpayers wouldn't be required to
isolate their business bank accounts from their personal
accounts, although many do have separate accounts, and others
might choose to do so out of convenience.
Instituting this increased bank and taxpayer reporting
would alone improve the accuracy with which taxpayers report
business income. Past experience shows that when additional
specific data is required, taxpayers improve their own
reporting.
For example, in 1988, when taxpayers were first required to
list the Social Security numbers of dependents claimed as
exemptions, more than 42 million fewer dependent exemptions
were claimed than in 1986, on just over 100 million returns.
This equates to almost half a claim dropped per return filed,
before the IRS did anything with the data.
Additional reporting, while an essential element, is only
one part of the TCA 2020 program. The most significant gains
would be made possible only by a much more effective IRS
compliance process enabled by modern technology that applies
newer analytical techniques to larger volumes of data.
With additional bank and taxpayer data, together with data
already collected from third parties, the IRS could more
readily detect which returns likely had significant
unreported income and follow up with more precisely targeted
taxpayer communication or auditing. In fact, much of the
follow-up could also be automated. This modernized process is
described in more detail later.
These reforms would also increase the amount of income
recovered where some limited reporting already occurs, such
as for capital gains and partnership income reported on
individual returns.
We estimate that if this proposal had been fully effective
in 2019, it would have generated approximately $97 billion in
revenue. However, as discussed later, we estimate that its
effectiveness would phase up over a 10-year period.
B. Passthrough Businesses
Unlike most corporations, many private businesses do not
pay tax as a business. Instead, their owners pay tax on the
income of their business on their individual returns.
Businesses organized in this way are called passthroughs
because the business income is passed through to the owners.
The IRS designates three categories of passthrough
businesses: sole proprietorships,
[[Page H79]]
partnerships, and S corporations. Sole proprietorships report
their business income on a schedule attached to the owner's
individual return, while S corporations and partnerships are
legal entities that file separate returns.
The amount of business income produced by passthrough
entities has steadily and vastly increased in the last 40
years, as shown in Figure 2: Twenty-five years ago,
corporations, which pay tax directly, accounted for almost
all the income produced by significant-sized businesses.
Today passthrough entities account for almost as much income
as corporations.
Mr. NEAL. Mr. Speaker, he points out in the opening paragraph of a
tax notes special. By the way, those of us in the tax world know what
tax notes means. He said that last year, this would be 2021, the
Federal Government failed to collect $574 billion of taxes that were
legally due but not paid. That is equal to more than most of the
Federal deficit. If they want to reduce the Federal tax deficit, we
should do a better job with tax compliance, which, after all, is the
basis of a representative democracy.
Mr. Speaker, 86 percent of the American people pay their taxes every
year on time. Do you know why? Because they get paid in wages and it
comes from withholding taxes, that is what it is about.
The American people are wise to what is being presented here tonight.
We live in a two-tier tax system. Wage earners follow the rules.
Wealthy billionaires, they get to skirt their responsibilities. That is
what we are being asked to vote on tonight.
IRS funding has been stagnant, staffing levels have dropped. Have you
tried getting an IRS office on the phone?
How many times will we continue to let those at the top get away
without paying their share?
We lose out on--just think of it again--almost $600 billion a year in
unpaid taxes. It is very sophisticated tax planning that is done by
high-priced attorneys and CPAs. It is estimated that this could be up
to $7 trillion because we score items over the course of 10 years.
What might this funding pay for?
How about Social Security? How about Medicare? How about a strong
military? How about a child tax credit that could be expanded? How
about universal paid family and medical leave? How about bringing down
healthcare costs?
The audit rates amongst millionaires have declined by 70 percent
since 2010. Let me repeat that for anybody who didn't get that. The
audit rate for millionaires has declined by 70 percent since 2010.
Low-income workers who receive the earned income tax credit, they are
audited more now than taxpayers who are making over $1 million a year.
All we are asking for is fairness in the distribution of the
responsibilities as to how we pay for government. There is a different
set of standards across the land now. And to point that out to you once
again--what is our commitment to America?
It should be based on a fair tax system that collects what is due
from those who ought to be paying.
The former IRS Commissioner, a Republican, Charles Rettig, he pointed
out that he was fully in support of the legislation that we were
offering because the IRS is continually out-maneuvered and out-gunned
by sophisticated efforts from tax lawyers and CPAs.
We have to put American families over the politics in the
distribution of theater that we are witnessing tonight. See through
this legislation and vote ``no.''
Mr. Speaker, I reserve the balance of my time.
Mr. SMITH of Nebraska. Mr. Speaker, I include in the Record an
excerpt from a 2021 Biden administration proposal called ``The American
Families Plan Tax Compliance Agenda'' that asks for $80 billion in IRS
funding and clearly shows a plan for 86,852 new hires.
[From the U.S. Department of the Treasury, May 2021]
The American Families Plan Tax Compliance Agenda
Restoring IRS Resources
The first step in the President's efforts to restore IRS
enforcement capability is a sustained, multi-year commitment
to rebuilding the IRS. This involves spending nearly $80
billion on IRS priorities over the course of the decade
including hiring new specialized enforcement staff,
modernizing antiquated information technology, and investing
in meaningful taxpayer service--including the implementation
of the newly expanded credits aimed at providing support to
American families. Importantly, the additional resources will
go toward enforcement against those with the highest incomes,
and audit rates will not rise relative to recent years for
those earning less than $400,000 in actual income.
The President's proposal includes two components: a
dedicated stream of mandatory funds ($72.5 billion over a
decade) and a program integrity allocation ($6.7 billion over
a decade). These mechanisms provide for a sustained, multi-
year commitment to revitalizing the IRS that will give the
agency the certainty it needs to rebuild.
The IRS proposal includes year-by-year estimates of the
additional resources that will be directed toward the agency
as well as the specific activities that these resources would
support. The design ensures that the IRS is able to absorb
and usefully deploy additional resources over the entire 10-
year horizon and keeps budget growth manageable at around 10
percent per year.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from North Carolina (Mr. Murphy), a member of the Ways and Means
Committee.
Mr. MURPHY. Mr. Speaker, I rise today in support of the Family and
Small Business Taxpayer Protection Act, one of the first legislative
acts of the new Republican majority.
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Main Street America has suffered 2 years too many of Democrats' one-
party rule. Inflation continues to hover at record highs, and small
businesses continue to struggle.
The last thing that these small businesses can afford right now is
87,000 new IRS agents not only targeting their enterprises but
targeting their livelihoods. With 11 million tax returns still awaiting
IRS action, the IRS should be focusing on doing their job rather than
weaponizing their agency.
This isn't new. The Democrats have used the IRS and the Tax Code as a
weapon before and are attempting to do it again. The Family and Small
Business Taxpayer Protection Act rescinds new IRS funding intended to
target middle-class families.
This cannot wait.
Mr. Speaker, I urge passage of this bill so our small businesses can
thrive absent any fear of IRS agents knocking at their door.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Texas
(Mr. Doggett), who intends to talk about the tax gap.
Mr. DOGGETT. Mr. Speaker, this first Republican bill should be known
as the protect Donald Trump and his tax cheating cronies act.
After years of obstructing access to Donald Trump's tax returns, we
learned how little he paid toward the cost of our national security and
how poorly the Trump Internal Revenue Service enforced our tax laws.
Each year the richest 1 percent in our country avoid paying an
incredible $160 billion of the taxes they owe. This crime wave of
Trump-style tax cheating is made possible by Republican insistence on
defunding the revenue police. Over the past decade, audit rates for
corporations are down by half and the ultrarich by three-fourths.
Republican claimed interest in law and order seems to vanish when it
comes to tax fraud by the wealthiest few. And their very first bill
adds $114 billion to our deficit. Yes, Trump may have been
indispensable last week, but this is outrageous. When those, like
Trump, don't pay what they owe, then the tax burden gets shifted to
small businesses and to families across the country.
Reject the Republican drive to defund.
Mr. SMITH of Nebraska. Mr. Speaker, I include in the Record a
Republican Ways and Means Committee release that explains the
Congressional Budget Office's determination that it expects over $20
billion in revenue to come from the increased audits on taxpayers--that
means families and small businesses making less than $400,000.
[From waysandmeans.house.gov, August 12, 2022]
CBO: New IRS Audits Will Grab at Least $20B from Lower- & Middle-Income
Families
Key Point: At least $20 billion of the revenue Democrats
hope to collect from taxpayers with a supercharged IRS would
come from lower- and middle-income earners and small
businesses, according to a new analysis
[[Page H80]]
by the nonpartisan congressional scorekeeper. That's in
addition to existing audits of these income levels.
Explanation: Last weekend, all 50 Senate Democrats voted
against an amendment offered by Senate Finance Republican
Leader Mike Crapo (R-ID) that would have protected lower- and
middle-income American taxpayers against new audits by the
IRS.
The Congressional Budget Office (CBO) confirms that had
this amendment passed and lower- and middle-income taxpayers
been protected, revenue in Democrats' bill would have been
reduced by at least $20 billion--confirming that at least $20
billion of the $124 billion in new revenue expected by a
supercharged IRS will be coming from higher audits on low-
and middle-income Americans. This will be in addition to
existing audits on these income levels.
From CBO:
``CBO has not completed a point estimate of this amendment
but the preliminary assessment indicates that amendment 5404
would reduce the 'non-scorable' revenues resulting from the
provisions of section 10301 by at least $20 billion over the
FY2022-FY2031 period.''
Additional Background:
Lower- and middle-income earning Americans are the primary
target in Democrats' bill:
A previous Congressional Budget Office analysis makes clear
that under this plan, audit rates will ``rise for all
taxayers'' and the policy ``would return audit rates to the
levels of about 10 years ago.''
The Joint Committee on Taxation, Congress's official tax
scorekeeper, says that from 78 percent to 90 percent of the
money raised from under-reported income would likely come
from those making less than $200,000 a year. Nearly half of
the audits would hit Americans making $75,000 per year or
less and only 4 percent to 9 percent would come from those
making more than $500,000.
Democrats voted against guardrails preventing audits for
middle-income earners, instead using non-binding legislative
language that would do nothing to protect taxpayers from
agency abuse.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the
gentlewoman from Texas (Ms. Van Duyne).
Ms. VAN DUYNE. Mr. Speaker, I rise today in full support of H.R. 23
which rescinds the additional funding for the already inflated IRS. I
think we can all agree that the last thing Americans need right now is
a government who is actively working against them.
One of the most outrageous provisions in the Democrats' so-called
Inflation Reduction Act was giving the IRS 72 billion taxpayer dollars
to hire 87,000 additional agents whose job would be to stalk
transactions of everyday Americans and attack small businesses.
Middle-class Americans and the small businesses that fuel our economy
have been unable to catch a break over the last 2 years. That ends
today. There is simply no reasonable rationale to make the IRS larger
than the Pentagon, State Department, FBI, and Border Control together.
If we are adding an additional 87,000 agents, why don't we send them
to the southern border to help our border agents who are already
overwhelmed and understaffed?
I stand with my colleagues today in support of H.R. 23 to block the
intrusive and unnecessary 87,000 new IRS agents. Americans deserve a
government that will work for them, and stopping this funding is a
first step in the right direction.
Mr. NEAL. Mr. Speaker, I include in the Record the Statement of the
Administration Policy opposing H.R. 23.
Statement of Administration Policy
H.R. 23--To rescind certain balances made available to the Internal
Revenue Service
The Administration strongly opposes H.R. 23, to rescind
certain balances made available to the Internal Revenue
Service (IRS). The bill would rescind funding passed in the
Inflation Reduction Act (IRA) that enables the IRS to crack
down on large corporations and high-income people who cheat
on their taxes and evade the taxes that they owe under the
law.
This reckless bill would increase the deficit by nearly
$115 billion over 10 years per an estimate by the
Congressional Budget Office by enabling wealthy tax cheats to
engage in additional tax fraud and avoidance. To be clear,
the Treasury Secretary has already directed that none of the
additional IRS resources be used to increase audit rates
relative to historical levels for small businesses or
households with incomes below $400,000. Far from protecting
middle-class families or small businesses, H.R. 23 protects
wealthy tax cheats at the expense of honest, middle-class
taxpayers. Each year the top one percent hides about 20
percent of their income from the government so they can get
away with not paying any tax on it. That means that working
people--who report 99 percent of their income to the IRS--pay
a larger share of collected taxes than they should. Not only
does it shift the tax burden from the wealthy to the middle-
class, it would also make it harder for middle-class families
and small businesses to get timely tax refunds and other
important services from the IRS, by rescinding billions in
funding for IRS information technology and operations.
With their first economic legislation of the new Congress,
House Republicans are making clear that their top economic
priority is to allow the rich and multi-billion dollar
corporations to skip out on their taxes, while making life
harder for ordinary, middle-class families that pay the taxes
they owe. That's their agenda; not lowering costs or cutting
taxes for hard working Americans--as President Biden has
consistently advocated.
If the President were presented with H.R. 23--or any other
bill that enables the wealthiest Americans and largest
corporations to cheat on their taxes, while honest and hard-
working Americans are left to pay the tab--he would veto it.
Mr. NEAL. Mr. Speaker, I include in the Record a CBO score for this
bill that is showing that it will add $114 billion to the Federal
deficit over the next 10 years.
ESTIMATED BUDGETARY EFFECTS OF H.R. 23, THE FAMILY AND SMALL BUSINESS TAXPAYER PROTECTION ACT, AS POSTED ON THE WEBSITE OF THE CLERK OF THE HOUSE OF REPRESENTATIVES ON JANUARY 9, 2023 AS AN
ITEM THAT MAY BE CONSIDERED PURSUANT TO A RULE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
-----------------------------------------------------------------------------------------------------------------------------------------------------------
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023-2027 2023-2032
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Decreases (-) in Direct Spending
Total Changes in Direct Spending
Budget Authority................ -71,473 0 0 0 0 0 0 0 0 0 -71,473 -71,473
Outlays......................... -2,359 -2,835 -4,124 -5,589 -7,252 -9,249 -11,423 -14,027 -14,605 0 -22,159 -71,463
Decreases (-) in Revenues
Total Changes in Revenues........... -1,645 -6,186 -12,506 -17,394 -21,574 -25,416 -28,983 -31,441 -31,879 -8,814 -59,305 -185,838
Net Increase or Decrease (-) in the Deficit from Changes in Direct Spending and Revenues
Net Effect on the Deficit........... -714 3,351 8,382 11,805 14,322 16,167 17,560 17,414 17,274 8,814 37,146 114,375
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues
that are subject to those procedures are shown above.
The Congressional Budget Office adheres to laws and Congressional rules concerning the federal budget and to a set of principles (called the Scorekeeping Guidelines) created by the Congress.
Those principles guide how the House and Senate Budget Committees, the Congressional Budget Office, and the Office of Management and Budget attribute budgetary effects to legislation, with
the goal of promoting consistent treatment of estimated effects among those agencies. (For more information on those guidelines, see Congressional Budget Office, CBO Explains Budgetary
Scorekeeping Guidelines, January 2021, www.cbo.gov/publication/56507.)
When a provision in an authorization bill provides funding for administrative or program management activities, such as when the IRS receives additional funding for administrative activities,
spending of those amounts can result in increases in receipts. Guideline 14, however, directs scorekeepers to exclude those increases when estimating the budgetary effects of proposals that
would provide additional mandatory funding for such activities.
Guideline 14 was adopted in part to avert cases in which possible, but uncertain, receipts were used to offset near-term increases in spending resulting from the same bill. That guideline is
asymmetrical, however. That is, even though increased receipts cannot be credited to a bill that would increase administrative funding, estimated receipt losses that might result from a
decrease in such funding are included in the estimated budgetary effects.
H.R. 23 would rescind unobligated funds provided by paragraphs (1)(A)(ii), (1)(A)(iii), (1)(B), (2), (3), (4), and (5) of section 10301 of Public Law 117-169. CBO estimates that the bill would
decrease outlays by $71 billion and decrease receipts by $186 billion over the 2023-2032 period. Both of those effects are included in accordance with Guideline 14.
Mr. NEAL. Mr. Speaker, I include in the Record an op-ed piece from
the former IRS Commissioner Charles Rettig, a Republican, titled: ``IRS
sets the record straight: We're going after tax evaders, not honest
Americans.''
[From Yahoo! Finance, Aug. 25, 2022]
IRS Sets the Record Straight: We're Going After Tax Evaders, Not Honest
Americans: Op-Ed
(By Charles P. Rettig)
As the nation's tax administrator, the IRS plays a unique
role in our nation. It can be a difficult job. After all,
does anyone really like paying taxes? Of course not. But
they're essential to fund the roads we drive on, the schools
our children attend, support our military and so much more.
Unfortunately, given the nature of this work and historical
stereotypes, the IRS is often perceived as an easy target for
mischaracterizations of what
[[Page H81]]
IRS employees do--and that's exactly what's happened in
recent weeks.
The recent debate over providing badly needed funding to
the IRS is filled with outright false suggestions about what
the agency and our hardworking employees do--as well as how
the additional resources will be handled.
The bottom line is this: These resources are absolutely not
about increasing audit scrutiny on small business or middle-
income Americans. The investment of these important resources
is designed to support honest, compliant taxpayers. Our
investment is designed around a Treasury directive that audit
rates do not rise relative to recent years for households
making under $400,000.
We all want a fair and impartial system where everyone
contributes their fair share, no more and certainly no less.
A robust, visible tax enforcement effort focused on high-end
tax evaders and those supporting them is a priority.
Underpayments by tax evaders shift the burden of operating
our great country onto honest, hard-working Americans who
follow the law. With this new law, honest taxpayers will see
badly needed, meaningful service improvements at the IRS. The
IRS should be able to answer the phones and process
information--including tax returns--in a timely manner.
Enhanced IT systems and taxpayer services will mean that
honest taxpayers will be better able to comply with the tax
laws, ultimately resulting in a lower--yes, lower--likelihood
of being audited and a reduced burden on them.
To set the record straight on this important legislation
and dispel any lingering misperceptions, here are some key
facts to keep in mind:
False Statement: The IRS is hiring 87,000 armed special
agents to harass taxpayers.
Reality: Absolutely false. The majority of new hires the
IRS makes will be those who answer the phones, work on
processing individual tax returns or go after high-end
taxpayers or corporations who are avoiding their taxes. Less
than 1 percent of new hires will be in our IRS Criminal
Investigation (IRS-CI) area, which currently has a total of
about 2,100 special agents and is currently hiring about 300
more.
These CI special agents investigate criminal tax violations
typically related to money laundering, Bank Secrecy, National
Security and National Defense matters. They have been
involved in dismantling terrorist financing efforts and
criminal cartels as well as eliminating child exploitation
operations in the Dark Net that led to the arrests of
hundreds of people throughout the world. They do not perform
civil tax administrative functions such as audits of tax
returns. They are law enforcement officers, and every
American should be extremely proud they are on our team.
False Statement: All IRS employees--and those being hired
under the new legislation--will carry firearms.
Reality: Again, absolutely false. More than 97 percent of
IRS employees do not carry weapons. This includes key civil-
side enforcement personnel, including revenue agents,
examiners and others involved in audits and compliance work.
Less than 3 percent of IRS employees--expressly limited to
Criminal Investigation special agents--carry firearms. IRS
Criminal Investigation oversees the entirety of the work
related to criminal violations of the tax law and other
financial crimes. This is consistent with other federal law
enforcement agencies.
False Statement: The additional funding will be used to
hire more auditors to ``shake down'' average taxpayers.
Reality: False. Wage-earning taxpayers like firefighters,
construction workers, teachers and police officers are among
the most compliant taxpayers, given that their incomes come
from Forms W-2 and 1099. These resources are absolutely not
about increasing audit scrutiny on small businesses or
middle-income Americans. Instead, the additional resources
will also be focused on large corporate and high net-worth
taxpayers to enforce laws already on the books that the IRS
does not have enough resources to pursue.
False Statement: The new legislation will be a massive
overnight expansion of the IRS.
Reality: False. This funding--which will be spread over 10
years--will add employees over time as we modernize our
operations with meaningful technological enhancements. In
addition, the IRS has one of the oldest workforces in
government, and staffing has been in a deep decline for many
years. More than 50,000 employees will retire in the next few
years, leaving the foundation of the tax system that the
nation relies on at risk. We've been losing 10,000 employees
a year.
Overall, current IRS staffing is far below historical
norms. In 1992, the IRS had 117,000 employees--38,000 more
than today. Back then, the agency was dealing with fewer
taxpayers; the U.S. population has grown almost 30 percent
since 1992.
False Statement: This new funding will allow overreach by
the IRS, putting agents on every street corner and prying
into people's personal financial lives.
Reality: False. This funding will allow the IRS to better
serve the nation's taxpayers--and ultimately meet the
critical needs of our country. Our employees care and, like
others in government, take an oath to support our country. We
take pride in hiring veterans, people with disabilities and
people from all walks of life and from every corner of our
country. Many of our employees, including myself, are members
of a military family. And all of our employees reflect the
taxpayers we serve.
I am an extremely proud American, a member of a proud
military family, and simply will not accept baseless, harmful
assertions against the interests of our country and the
proud, hard-working employees of the IRS.
Everyone should know this about IRS employees: We care, a
lot, about this country and you.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Thompson), who is a much-valued member of the Ways and
Means Committee.
Mr. THOMPSON of California. Mr. Speaker, I rise in opposition to this
misguided, expensive, and unpaid for legislation.
For years, my colleagues on the other side of the aisle have done
everything they can to demonize the IRS. But here is the reality: When
the IRS doesn't have the funding it needs, then two very bad things
happen. The very wealthy tax cheats are able to avoid paying their fair
share; and two, our constituents who need help from the IRS face
unnecessary and destructive delays in getting that help.
The majority can't criticize the IRS for its performance while
simultaneously fighting to cut the IRS budget.
Despite what my colleagues on the other side of the aisle would lead
you to believe, Mr. Speaker, there aren't 87,000 storm troopers funded
in this bill who are going to bang down your door. That is pure and
utter nonsense.
Taxes are the price we pay to live in a civilized society. They are a
fundamental part of our civic responsibility to one another.
This bill is a bad idea, and I encourage all my colleagues to vote
``no''.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Kansas (Mr. Estes).
Mr. ESTES. Mr. Speaker, I am pleased today to rise in support of
commonsense legislation that puts the American people ahead of padding
the coffers of the IRS.
It wasn't long ago that Washington was under one-party rule. This
Chamber was recently under the leadership of the Democratic Party that
worked to give D.C. bureaucrats more power and wanted to hire an army
of IRS agents to harass and audit my constituents while ignoring the
need for more border agents to address the crisis at our southern
border.
Congressman Smith's legislation eliminates the devastating IRS
provision that Democrats snuck into their so-called Inflation Reduction
Act by rescinding the funding to this D.C. agency.
The facts are that middle- and lower-income people are audited more
by IRS agents by design of the IRS.
The Kansans I represent need relief from high gas prices and rampant
inflation caused by the current administration and one-party rule. My
constituents don't need a supercharged IRS that will investigate their
transactions between friends and sic 87,000 new agents on them.
This bill, as the first bill that the new Congress addresses, puts
our priorities on full display. Republicans are ready to restore our
Nation and hold government accountable.
Mr. Speaker, I urge my colleagues to support this crucial
legislation.
Mr. NEAL. Mr. Speaker, I thank the gentleman from Kansas, my friend.
He just pointed out that the people at the bottom are audited more than
the people at the top. That is precisely the point that we are
attempting to make here during the course of the next few minutes.
Mr. Speaker, I yield 1 minute to the distinguished gentleman from
Maryland (Mr. Hoyer), who is the former majority leader.
Mr. HOYER. Mr. Speaker, I thank the gentleman for yielding and adopt
all the remarks he made in his opening statement.
This debate about IRS lends itself to being the most dishonest and
demagogic rhetoric that I have seen in the Congress at any point in
time.
I rise as the former chairman of the Treasury-Postal Committee, now
the Financial Services and General Government Committee to which I will
return having left the majority leader's spot.
This bill is a bad bill. Every small American taxpayer ought to be
for this bill because this bill will make sure that others pay their
fair share as they do.
[[Page H82]]
That is the issue. They are paying their fair share, as the chairman
noted, because we take it out of their salary. But the people who get
it through dividends and capital gains, et cetera, et cetera, aha, they
have got the lawyers, the accountants, and the people who can tell them
how not to pay their fair share.
This is a bill against small business. This is a bill against the
small taxpayer. This is against paying your fair share.
Mr. SMITH of Nebraska. Mr. Speaker, I include in the Record a
Republican Ways and Means Committee release explaining that Senate
Democrats voted down an amendment that would prevent increased audits
on taxpayers making less than $400,000 a year and House Democrats
refuse to take up a bill that would do the same.
[From waysandmeans.house.gov, Aug. 17, 2022]
Democrats Fail To Protect Middle Class From IRS Audits
Democrats voted against guardrails that would have
protected lower- and middle-income taxpayers from more audits
as a result of supercharging the IRS with 87,000 new agents.
Instead, they hope you'll just ``take their word for it''
that the IRS won't target American families who are living
paycheck to paycheck. Various news outlets have circulated
these claims as facts, but the bill text says otherwise,
Reason Magazine's Matt Welch reports.
Democrats claim they won't target lower- and middle- income
earners with their expansion of the IRS by 87,000 agents . .
.
``. . . top Democrats have been busy escalating their
already implausible claims that goosing the IRS enforcement
budget by 69 percent over a decade, hiring 87,000 additional
new staffers at an agency that currently employs 79,000, and
nabbing an estimated extra $124 billion in tax revenue will
miraculously not bring any percentage increase in audits
performed on Americans earning less than $400,000 a year.''
. . . but the nonpartisan Congressional Budget Office
predicts boosted IRS funding will increase audits for all
taxpayers . . .
``CBO Director Phillip L. Swagel estimated that boosting
IRS funding by $80 billion would increase tax revenues by
$200 billion (the number would later rise to $207 billion,
before settling at $204 billion), adding that `the proposal .
. . would return audit rates to the levels of about 10 years
ago; the rate would rise for all taxpayers' (italics mine),
though `higher-income taxpayers would face the largest
increase.' ''
. . . and Democrats voted against Republican amendments
preventing lower income earners from being targeted by higher
audits.
``In the final IRA bill, in fact, $45.7 billion is
earmarked for `enforcement,' and $25.3 billion goes to
`operations support.' There is no reason to conclude from
those dollar amounts that the number of resulting audits will
be less than originally projected.''
Many ``fact checkers'' have refused to verify claims by
Democrats:
``As Liz Wolfe has reported repeatedly in the pages of
Reason, none of these assurances live in the text of the
Inflation Reduction Act (IRA) itself. One Republican
amendment ``to prevent the use of additional Internal Revenue
Service Funds from being used for audits of taxpayers with
taxable incomes below $400,000'' was voted down on party
lines. You'll just have to take Democrats' word for it.
``That's good enough for many news organizations, who have
been coughing up ``fact-checks'' aimed not at the
demonstrable veracity of White House promises about
significant legislation impacting literally all adult
Americans but at the hyperbole of Republican criticism
thereof.''
Democrats will raise audits on the middle class under the
guise of going after the tax gap.
``The fact remains that you can't close the tax gap without
greater enforcement on the poor and that enforcement on the
poor is considerably less expensive.''
``It is true that Yellen has freshly directed the IRS to
not increase the audit rate of under-$400,000s. And it's also
true that there's no structural enforcement mechanism
preventing the agency from continuing to go after low-hanging
fruit to meet revenue targets.''
Only $3.2 billion of the $80 billion total goes towards
improving services for taxpayers.
``. . . just $3.2 billion of the $80 billion is earmarked
for customer service, producing a mere 9 percent increase
over the previous baseline. If the agency is bad at answering
phone calls--and it's bad at answering phone calls--a 9
percent bump seems inadequate to the task.''
Mr. SMITH of Nebraska. Mr. Speaker, I yield 3 minutes to the
gentleman from Missouri (Mr. Smith).
Mr. SMITH of Missouri. Mr. Speaker, I thank the gentleman from
Nebraska for yielding.
House Republicans made a promise to the American people to fight for
working-class families. And we made a promise that our first order of
business under a new Republican majority would be to repeal the $80
billion Democrats gave the IRS to hire 87,000 new agents to target
American working-class families.
We are delivering on that promise today.
This bill rescinds the IRS funds in the Inflation Reduction Act--a
law that does nothing to combat inflation but everything to empower an
agency that has targeted Americans. They have leaked taxpayer
information, and under the Biden administration, they threatened to
snoop into the bank accounts of millions of middle-class families.
We know this because President Biden wrote such a proposal into his
first budget as part of his agenda to expand the power of the IRS and
shovel billions more to this troubled agency.
At that time, we asked the Joint Committee on Taxation how many
Americans might be subject to such a scheme to spy into their bank
accounts. The JCT said that up to 134 million taxpayers could be
targeted.
So much for just going after the millionaires and the billionaires
that our Democrat colleagues like to talk about.
While the Biden administration--including Treasury Secretary Yellen--
has tried to dismiss concerns over how middle-class Americans would be
targeted by the IRS, under the Democrats' $80 billion infusion of cash,
the Congressional Budget Office has affirmed undoubtedly families
making less than $400,000 per year would be subjected to increased
enforcement and, yes, audits by the IRS.
But of course this would be the case when you realize that more than
half of the $80 billion Democrats gave the IRS is earmarked for
enforcement.
The IRS does not need a raise. It needs a reckoning. And what starts
today with rescinding this $80 billion continues through rigorous IRS
oversight that Democrats ignored under their one-party rule.
Taxpayers deserve true oversight for an agency that leaked the tax
returns of thousands of American taxpayers at the same time the White
House was calling for tax increases on those individuals. We are
talking about an agency with a history of targeting conservatives with
woefully underperforming customer service and whose own commissioner
under Obama called this $80 billion more than three times the amount of
money the agency actually needed.
House Republicans are ready to provide oversight and accountability,
and that starts today with ending this $80 billion pay raise.
Mr. NEAL. Mr. Speaker, let me congratulate Mr. Smith, incidentally,
on his recent elevation to become the chairman of the Ways and Means
Committee. We look forward to a productive session during the next
couple of years.
Mr. Speaker, I include into the Record a blog post by the Center on
Budget and Policy Priorities summarizing the fact check that has
repeatedly debunked the false claim that we just heard a few seconds
ago, that the IRS is going to hire 87,000 new agents immediately.
[From Center on Budget and Policy Priorities, January 9, 2023]
House GOP's First Bill: A Misleading Gambit To Protect Interests of
Wealthy Tax Cheats
(By Chuck Marr)
House Republicans have announced that their first
legislative priority is to rescind nearly all of the
Inflation Reduction Act's $80 billion in ten-year funding for
the IRS, while repeating falsehoods and inflammatory rhetoric
about how that funding will be used. While the Republicans
have launched a campaign about a false ``army'' of 87,000
agents, the debate should focus on one accurate and alarming
number: the IRS has 2,284 fewer skilled auditors to handle
the sophisticated returns of wealthy taxpayers than it did in
1954. The decade-long, House Republican-driven budget cuts
have created dysfunction at the IRS, where relatively few
millionaires are now audited. If House Republicans succeed in
rolling back this critically needed funding and maintaining
this dysfunction, the IRS would be woefully understaffed,
hindering its ability to administer the tax code and collect
legally owed taxes--particularly from high-income and high-
wealth taxpayers. On behalf of honest taxpayers, policymakers
should reject the House Republican effort to protect wealthy
tax cheats.
The IRS workforce is composed of civilian public servants,
such as accountants and customer service representatives, who
collect nearly all the federal revenue to fund
[[Page H83]]
our government, from Medicare and Social Security to our
armed forces. Its skilled auditors, also known as revenue
agents, are highly trained to handle sophisticated tax
returns of wealthy people and multinational corporations. All
of these IRS employees perform a core function of government,
are central to the workings of our democracy, and work on
behalf of honest taxpayers.
Republican IRS critics, however, have constructed a
narrative around the IRS workforce becoming an ``army'' of
87,000 ``armed agents'' whose enemies are ``hardworking
American families and small businesses.'' This rhetoric is
false and dangerous.
Fact checkers have repeatedly debunked the 87,000 figure,
which comes from a prior Treasury estimate that it would use
new funding to hire 87,000 total staff over the next ten
years, including IRS employees in all departments, not just
skilled auditors. These are people who answer phones, process
returns, program computers, as well as a fraction--albeit an
important one--who audit complex tax returns.
The House GOP campaign ignores the reality of today's IRS--
which has resulted from the sharp budget cuts that
Republicans have pushed since 2010--as well as the harm that
would flow from rescinding much of the Inflation Reduction
Act's new IRS funding. The upcoming debate needs to cut
through the obfuscation of the House Republican campaign and
focus on honest and pertinent numbers.
Consider, in 2021, the IRS had 8,321 skilled auditors.
That's 40 percent fewer than the agency had in 2010, the year
before House Republicans were in the majority and began
driving the last decade of steep IRS budget cuts.
Moreover, it's 2,284 fewer revenue agents than the IRS had
in 1954--not a typo. The last time the IRS had fewer revenue
agents than it has today was in 1953. Today's economy is
seven times larger than it was in 1953 and our population has
more than doubled since then. Today's tax returns of wealthy
people and large multinationals are more complex and global,
which take more time for auditors to review.
As a result of these budget cuts and fewer skilled
auditors, audit rates have plummeted for wealthy individuals
and large corporations.
For the largest corporations (those with more than $1
billion in assets), the audit rate fell by more than half
between 2010 and 2017. For millionaires, the audit rate fell
by roughly 77 percent over the same period. Preliminary audit
data for 2018 and 2019 suggest that the audit rate may have
declined over 90 percent between 2010 and 2019.
House Republicans want to scare people with their false
claims about how the IRS would use the new resources. But the
reality is that, today, the IRS skilled audit staff is 2,284
smaller than in 1954, only a tiny fraction of millionaires is
audited, and large multinationals can hire large squads of
lawyers to easily overwhelm the resources of the IRS. One
only needs to skim President Trump's tax returns, the
indictment of convicted tax cheat Paul Manafort, and a
ProPublica investigation of how Facebook outgunned the IRS to
grasp the resources necessary to be serious about enforcing
our tax laws and how reckless it would be to keep the number
of skilled auditors at 1950s levels, as the House Republicans
would do.
Honest taxpayers and business owners deserve better. They
deserve an IRS that processes their tax returns and tax
refunds efficiently, answers the phone when they call with
questions, and ensures that the wealthy and profitable
corporations are paying the taxes they legally owe.
A key element of a healthy, functioning democracy is a
transparent tax system that is fairly enforced so that people
and corporations pay what they owe and the well-heeled and
powerful cannot flout their responsibility to pay their
taxes.
Efforts to protect wealthy tax cheats and purposely
undermine the IRS's ability to enforce tax laws are anti-
democratic and should be resoundingly rejected.
Mr. NEAL. Mr. Speaker, I include in the Record a FactCheck.org
article confirming that not all of the 87,000 people who will be hired
are going to work on enforcement.
[From FactCheck.org, Aug. 18, 2022]
IRS Will Target `High-Income' Tax Evaders with New Funding, Contrary to
Social Media Posts
(By Brea Jones)
QUICK TAKE
The Inflation Reduction Act includes $79 billion for the
IRS. Social media posts misleadingly claim the IRS will now
hire ``87,000 new agents'' to investigate average citizens.
But most new hires will provide customer services, and
enforcement efforts will be aimed at ``high-income and
corporate tax evaders,'' a Treasury Department spokesperson
said.
FULL STORY
President Joe Biden signed the Inflation Reduction Act--a
climate, health care and tax package--into law on Aug. 16.
The legislation includes roughly $79 billion for the IRS
over 10 years. The nonpartisan Congressional Budget Office
projects that the enhanced IRS enforcement funded by the law
will generate an additional $204 billion in revenue over 10
years. That represents additional taxes that are owed under
existing laws, but which go unpaid.
Treasury Department officials say not all new hires will
work on enforcement and increased revenues won't come from
middle-income earners. Treasury Secretary Janet L. Yellen
directed IRS Commissioner Charles P. Rettig not to use the
new funding to increase enforcement of taxpayers earning less
than $400,000. The IRS is a bureau of the Treasury
Department.
``Specifically, I direct that any additional resources--
including any new personnel or auditors that are hired--shall
not be used to increase the share of small businesses or
households below the $400,000 threshold that are audited
relative to historical levels,'' Yellen wrote in an Aug. 10
letter to Rettig. ``This means that, contrary to the
misinformation from opponents of this legislation, small
business or households earning $400,000 per year or less will
not see an increase in the chances that they are audited.''
But Republican members of Congress and social media users
have spread the false claim that the new law will be used to
hire ``87,000 new IRS agents.''
Sen. Ted Cruz, in an interview on Fox News that was posted
to Facebook, got it doubly wrong when he claimed that
``87,000 new IRS agents'' will be going after small
businesses and regular Americans.
``And, by the way, these IRS agents aren't there to go
after billionaires,'' Cruz said. ``They're there to go after
you. They're there to go after your small business.''
But, as we will explain later, not all of the new hires
will be ``agents.'' There's a big difference between IRS
agents, such as revenue agents and special agents, and the
workers who make up the bulk of the IRS staff. And, as we
said, the Treasury Department has directed the IRS not to
focus on small businesses and those earning less than
$400,000.
Some versions of the claim suggest that the 87,000 new
``agents'' will be armed--but, as we've written before, only
``special agents'' who investigate criminal violations of the
tax code are authorized to carry firearms.
Rep. Matt Gaetz took it one step further, calling it
``bizarre'' that the IRS bought $700,000 worth of ammunition
between March and June 1 of this year. He suggested that the
purchases are part of a ``broader effort'' to get ammunition
off the market. But, as we will detail later, the purchases
this year are in line with past years, according to
government data.
Some of the claims about the IRS on social media were tied
to an unrelated event--the FBI search of former President
Donald Trump's Mar-a-Lago home in Florida.
``The IRS is coming for you. The DOJ is coming for you. The
FBI is coming for you. No one is safe from political
punishment in Joe Biden's America,'' the official Twitter
account for the House Judiciary Committee Republicans
tweeted.
But Rettig, the IRS commissioner, wrote in a letter to
lawmakers on Aug. 4 that the resources obtained with the
funding from the Inflation Reduction Act ``are absolutely not
about increasing audit scrutiny on small businesses or
middle-income Americans.''
``Other resources will be invested in employees and IT
systems that will allow us to better serve all taxpayers,
including small businesses and middle-income taxpayers,''
Rettig said.
Funds for Customer Service and Enforcement
A Treasury Department report from May 2021 estimated that a
similar $80 billion investment proposed in Biden's American
Families Plan would have allowed the IRS to modernize and
restore the ``IRS enforcement capability'' in several ways--
including by hiring 86,852 full-time employees. That's where
the claim about hiring ``87,000 new agents'' apparently comes
from.
The 2021 report said the $80 billion investment to restore
the IRS would be broken down into two components: ``a
dedicated stream of mandatory funds ($72.5 billion over a
decade) and a program integrity allocation ($6.7 billion over
a decade).''
The $6.7 billion program integrity allocation will be used
for ``the hiring and retention of at least 5,000 new
enforcement personnel,'' the 2021 report said. ``The
mandatory funds are allocated over a 10-year horizon. They
provide enforcement resources, including a significant
investment in revitalizing the IRS's examination of large
corporations, partnerships, and global high-wealth and high-
income individuals.''
Over the past decade, the IRS has lost 40 percent of its
``complex revenue agents''--agents who handle complicated tax
returns of large businesses and corporations and go after
high-end tax evaders--as its budget has been gutted,
according to a Treasury Department spokesperson. ``Today, the
IRS has the same number of IRS revenue agents for complex
work as it had in WWII,'' the spokesperson told us in an
email.
Over the next five years, the IRS is expecting to lose up
to 52,000 employees to attrition, the Treasury Department
spokesperson told us in a phone interview. Most of the new
hires will replace the outgoing employees and will be on the
service side of the IRS.
``The majority of hires made with these resources fill
positions of the 50,000 IRS employees who are on the verge of
retirement. Of the net new hires, the majority are hired to
improve customer services--from upgrading IT to answering
phone calls,'' the Treasury Department spokesperson said.
The IRS might net about 30,000 new hires, as a result of
the number of retirements and new funding. But the IRS hasn't
yet released estimates for how many new employees the
[[Page H84]]
agency could hire with funding from the Inflation Reduction
Act. The IRS is expected to release the final numbers and
breakdown in the coming months.
``The resources to modernize the IRS will be used to
improve taxpayer services--from answering the phones to
improving IT systems--and to crack down on high-income and
corporate tax evaders who cost the American people hundreds
of billions of dollars each year,'' the spokesperson said.
``The majority of new employees will replace the standard
level of staff departures over the next few years and will be
hired to improve taxpayer services. The agency will 'also
bring on experienced auditors who can take on corporate and
high-end tax evaders, without increasing audit rates relative
to historical norms for people earning under $400,000 each
year.''
A White House spokesperson told us in an email, ``both
Treasury Secretary Yellen and the IRS Commissioner have been
explicit that these funds will be used for the wealthiest
taxpayers and not those making less than $400,000 per year.
These resources will improve technology and customer service,
which will make it less likely that honest taxpayers get
audited.''
Spending on Ammunition and Armed Agents
Gaetz, a Republican from Florida, raised concerns in June
that the IRS spent $700,000 on ammunition from March to June
of this year, and he introduced the Disarm the IRS Act in
July.
Gaetz described the ammunition acquisition as ``bizarre''
in a recent interview. Others have also echoed the claim.
But that's not an unusual amount of money for the IRS to
spend on ammunition and is on par with what has been spent in
previous years for the IRS Criminal Investigation division,
which was established in 1919.
IRS Criminal Investigation is the sixth-largest federal law
enforcement agency in the U.S. But it's a small unit of the
IRS overall, less than 3 percent of its total workforce,
according to the Treasury Department spokesperson.
The IRS Criminal Investigation division doesn't perform
routine IRS audits on average Americans.
``The bulk of IRS's tax administration work is done by
civilian auditors and revenue collectors,'' Justin Cole, a
spokesman for the IRS Criminal Investigation division, told
us in an email. ``IRS Criminal Investigation oversees the
entirety of the work related to criminal violations of the
tax law and other financial crimes.''
The division investigates cases related to money
laundering, cybercrime, bank secrecy, national security,
national defense and narcotics organizations--a large reason
for the need for firearms and training. The division is
famously known for the arrest of American gangster AL Copone.
More recently, the division has been involved in the task
force that is tracking the assets of Russian oligarchs.
``In order to carry out their daily duties, which include
search warrants and arrests, CI special agents carry
firearms,'' Cole said.
Using usaspending.gov, the official source of U.S. spending
data and the site used by Gaetz, we found that the IRS has
spent $816,248.90 so far in the fiscal year 2022 for ``duty
ammunition'' from Vista Outdoor Sales. That's a little less
than last fiscal year ($842,989,60) and slightly more than in
fiscal 2020 ($761,265,40). (All amounts are ``total
obligations,'' as of Aug. 18.)
The majority of the recent $725,460.10 spending went for
handgun ammunition and equals about 2,545 cases of
ammunition--``just enough for Special Agent handgun
qualifications,'' Cole said. ``CI purchases the minimum
amount of ammunition necessary to cover training and firearms
qualifications for its law enforcement employees.''
The IRS spent an average of $712,500 on ammunition for
fiscal years 2010 to 2017, according to a 2018 report to
Congress by the Government Accountability Office on firearms
and ammunition purchases by federal law enforcement agencies.
``There are about 3,000 employees in [the IRS Criminal
Investigation division], 2,100 of which are special agents
and the remaining professional staff. Only special agents
carry firearms,'' Cole said.
In 2021, there were 2,046 special agents, who ``are among
the most highly trained financial investigators in the
world,'' according to the 2021 annual report.
The number of special agents in the division hasn't changed
much in five years, according to the division's annual
reports. In 2017, there were 2,159 special agents. But the
number of special agents has declined substantially since
2009, when the bureau had 2,725--as we noted 12 years ago
while addressing a misleading claim about the IRS hiring
``16,500 new agents.'' That's a 33 percent decrease from 2009
to 2021.
New special agents complete six months of training,
including firearms training.
The IRS is not the only government agency that purchases
guns and ammunition for enforcement officers. The 2018 GAO
report lists several other agencies that make those
purchases, such as the Food and Drug Administration, the
National Institutes of Health and the Veterans Health
Administration.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
Connecticut (Mr. Larson) who is a distinguished member of the Ways and
Means Committee.
Mr. LARSON of Connecticut. Mr. Speaker, I rise to associate myself
with the remarks of the distinguished gentleman from Massachusetts.
I think he used the right words when he talked about theater.
Isn't it long overdue that we are honest with the American people
about what this is about?
Come on, Mr. Speaker, you can't really believe that what you are
proposing here isn't shielding the wealthiest people in this Nation and
corporations.
People at Augie & Ray's in East Hartford are not fooled by this, and
they understand what the agenda is. You place us further in debt and
leave us with little else to do to help the people who need it the
most.
What is this a guise for?
Cutting what you call entitlements.
What people at Augie & Ray's know are earned benefits that they pay
for every single week out of their paycheck where they pay their taxes
as well.
The SPEAKER pro tempore. Members are reminded to direct their remarks
to Chair.
{time} 1945
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Illinois (Mr. LaHood), a member of the Ways and Means Committee.
Mr. LaHOOD. Mr. Speaker, I rise today in strong support of the Family
and Small Business Taxpayer Protection Act.
This bill defends American taxpayers against an unchecked,
supercharged IRS and prioritizes customer service and tax return
processing, two of the agency's most important functions.
Included in the Democrats' reckless Inflation Reduction Act this past
summer, the IRS received an additional $80 billion in funding, with
over half directed toward enforcement.
What is worse, the Democrats' bill failed to include any safeguards
to protect low- and middle-income taxpayers from being unfairly
targeted for tax audits.
While the IRS continues to beef up their audit division, the agency
still has 3.7 million unprocessed tax returns and a total of 11.1
million returns awaiting action. This is simply unacceptable. The IRS
should focus on processing these returns, along with addressing the
awful level of customer service currently available to taxpayers.
Law-abiding families and small businesses in Illinois need their tax
returns processed and phone calls answered, not more IRS agents
knocking on their doors with burdensome audits.
Mr. Speaker, I urge the adoption of this bill.
Mr. NEAL. Mr. Speaker, that is precisely the point that we have
attempted to make. Customer service is not occurring because the IRS
has been cut by 30 percent over the last 15 years.
Mr. Speaker, I include in the Record a letter from the IRS
Commissioner to the House of Representatives confirming that the IRS
will not raise audit rates on those making under $400,000 a year.
Department of the Treasury,
Internal Revenue Service,
Washington, DC, August 4, 2022.
Dear Member of the House of Representatives, It has been
the greatest honor of my professional life to spend the last
four years at the helm of the IRS. I am struck each day by
the commitment of dedicated IRS employees to helping American
families. And our employees have done all that without the
tools to do so effectively. For too long, the agency has not
had the resources that it needs to ensure the tax laws are
enforced fairly and that Americans receive the level and
quality of service they deserve. We are the greatest country
in the world, yet the agency that touches more Americans than
any other continually struggles to receive sufficient
resources to fulfill its important mission.
The resources in the reconciliation package will get us
back to historical norms in areas of challenge for the
agency--large corporate and global high-net-worth taxpayers--
as well as new areas like pass-through entities and
multinational taxpayers with international tax issues, where
we need sophisticated, specialized teams in place that are
able to unpack complex structures and identify noncompliance.
These resources are absolutely not about increasing audit
scrutiny on small businesses or middle-income Americans. As
we've been planning, our investment of these enforcement
resources is designed around the Department of the Treasury's
directive that audit rates will not rise relative to recent
years for households making under $400,000. Other resources
will be invested in
[[Page H85]]
employees and IT systems that will allow us to better serve
all taxpayers, including small businesses and middle-income
taxpayers. Enhanced IT systems and taxpayer service will
actually mean that honest taxpayers will be better able to
comply with the tax laws, resulting in a lower likelihood of
being audited and a reduced burden on them.
Large corporate and high-net-worth taxpayers often engage
teams of sophisticated representatives who pursue unsettled
or sometimes questionable interpretations of tax law. The
integrity and fairness of our tax administrative system
relies upon the ability of our agency to maintain a strong,
visible, robust enforcement presence directed to these and
other similarly situated taxpayers when they are
noncompliant. These important efforts also support honest
taxpayers who voluntarily comply with their filing and
reporting requirements.
The IRS has fewer front-line, experienced examiners in the
field than at any time since World War II, and fewer
employees than at any time since the 1970s. Advances in
technology have been helpful but have not kept pace with the
ever-increasing responsibilities and challenges facing the
IRS. As a result, the IRS has for too long been unable to
pursue meaningful, impactful examinations of large corporate
and high-networth taxpayers to ensure they are paying their
fair share. This creates a direct revenue loss from evaders
and lessens the potential to deter others from pursuing a
similar path of noncompliance. Every American should support
a fair and impartial system of tax administration supported
by an appropriately resourced tax administrator. In fact, the
continued success of our country depends, in part, upon the
success of the agency in appropriately, fairly and
impartially enforcing the tax laws and in providing
meaningful, impactful services to every American.
As an extremely proud American, I'm grateful for your
support of the IRS and our dedicated employees. I cannot be
forceful enough in emphasizing that these resources will be
transformative for the agency and for American taxpayers. I
am available to meet with you at your convenience to discuss
the foregoing.
Thank you,
Charles P. Rettig.
Mr. NEAL. Mr. Speaker, I include in the Record a letter from
Secretary Yellen to the IRS Commissioner, directing the IRS not to use
any additional funding to increase audits on small businesses and
households earning less than $400,000 a year.
Department of the Treasury,
Secretary of the Treasury,
Washington, DC, August 10, 2022.
Charles P. Rettig,
Commissioner, Internal Revenue Service,
Washington, DC.
Dear Commissioner: The Inflation Reduction Act includes
much-needed funding for the IRS to improve taxpayer service,
modernize outdated technological infrastructure, and increase
equity in the tax system by enforcing the tax laws against
those high-earners, large corporations, and complex
partnerships who today do not pay what they owe.
These crucial investments have been a focus of the Biden
Administration since the President's first day in office, and
I was heartened to see the legislation pass the Senate this
weekend.
Notwithstanding the changes that arose because of
Republican challenges during the Byrd process, I write today
to confirm the commitment that has been a guiding precept of
the planning that you and your team are undertaking: that
audit rates will not rise relative to recent years for
households making under $400,000 annually.
Specifically, I direct that any additional resources--
including any new personnel or auditors that are hired--shall
not be used to increase the share of small business or
households below the $400,000 threshold that are audited
relative to historical levels. This means that, contrary to
the misinformation from opponents of this legislation, small
business or households earning $400,000 per year or less will
not see an increase in the chances that they are audited.
Instead, enforcement resources will focus on high-end
noncompliance. There, sustained, multiyear funding is so
critical to the agency's ability to make the investments
needed to pursue a robust attack on the tax gap by targeting
crucial challenges. like large corporations, high-net-worth
individuals and complex pass-throughs, where today the IRS
has resources to initiate just 7,500 audits annually out of
more than 4 million returns received.
This is challenging work that requires a team of
sophisticated revenue agents in place to spend thousands of
hours poring over complicated returns, and it is also work
that has huge revenue potential: indeed, an additional hour
auditing someone making more than $5 million annually
generates an estimated $4,500 of additional taxes collected.
This is essential work that l know the IRS is eager to
undertake.
For regular taxpayers, as you emphasized last week, the
result of this resource infusion will be a lower likelihood
of audit by an agency that has the data and technological
infrastructure in place to target enforcement resources where
they belong--on the high end of the income distribution,
where the top 1 percent alone is estimated to not be paying
$160 billion in owed taxes each year. That's important as a
matter of revenue-raising, but it's also essential as a
matter of fairness.
Crucially, these resources will support a much-needed
upgrade of technology that is decades out-of-date, and an in
vestment in taxpayer service so that the IRS is finally able
to communicate with taxpayers in an efficient, timely manner.
I look forward to working with you on creating new digital
tools to allow taxpayers to get information from the IRS
instantaneously and on improving taxpayer service, so the
agency is well-equipped to answer calls when they come in.
This historic investment in our tax system will accomplish
two critical objectives. It will raise substantial revenue to
address the deficit; and it will create a fairer system,
where those at the top who do not today comply with their tax
obligations find it far less easy to do so, and where all
taxpayers receive the service from the IRS that they deserve,
and that your dedicated workforce is eager to deliver. The
importance of the work ahead cannot be overstated.
Sincerely,
Janet L. Yellen.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Oregon
(Mr. Blumenauer), a very capable member of the Ways and Means
Committee.
Mr. BLUMENAUER. Mr. Speaker, I appreciate how Mr. Neal laid out the
facts here.
The Family and Small Business Taxpayer Protection Act is a sham. The
facts are that this legislation will shield tax cheats at the expense
of working families.
The last time Republicans were in charge, they systematically
defunded the IRS. The agency lost nearly 20 percent of its funding,
shed more than 20,000 employees, and the audit rate for millionaires
dropped 70 percent. We heard one of our Republican colleagues make that
point.
This legislation will enable those at the top of the heap to be able
to remember the taxes they should have reported. It raises, as we have
heard, $187 billion in revenue. This bill, if enacted, would add to the
deficit $114 billion because it is misguided and misdirected and wrong.
Mr. Speaker, I strongly urge the rejection of this legislation
enforcement of the laws for everybody.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Tennessee (Mr. Kustoff), a member of the Ways and Means Committee.
Mr. KUSTOFF. Mr. Speaker, I rise today in support of the Family and
Small Business Taxpayer Protection Act.
This new Republican majority is focused on protecting taxpayers and
small businesses from overreach and abuse. Blocking the Biden
administration from unleashing 87,000 new IRS agents on taxpayers is a
crucial first step toward fulfilling our commitment to America.
This legislation will prohibit the IRS from using new funds to target
lower- and middle-class families and small businesses with more
burdensome and intrusive audits.
As households grapple with a struggling economy, the last thing they
need is more harassment from a supercharged IRS.
Republicans are unified in our effort to bring economic relief to
Americans, not more government overreach and hardship.
Mr. Speaker, I urge my colleagues to support this legislation and
stop the administration's weaponizing of the IRS.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from New
Jersey (Mr. Pascrell), who is sure to offer clarity to this important
issue.
Mr. PASCRELL. Mr. Speaker, I rise in rigorous opposition to this
shortsighted bill, but thank you for allowing us the opportunity to lay
the facts on the table.
I mean, it is stunning that while you peddled those falsehoods, you
seek at the same time to add $114 million to the deficit. The chairman
said it. Everybody said it.
Republican budget cuts have left the IRS with 2,284 fewer skilled
auditors to keep wealthy taxpayers from cheating than it had in 1954.
That makes no sense. You know it is more complicated. We taxed work
before. Now we tax assets, and we cover them up when we do our taxes.
Who the heck are you kidding? The GOP plan would aid and abet a flood
of tax cheating by Wall Street tycoons. That would be the direct impact
of this bill. Thankfully, it is going to be dead on arrival when it
goes to the other side of the building.
Republicans love that our massive tax gap keeps growing, and they
want to make it worse.
[[Page H86]]
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Oklahoma (Mr. Hern), a member of the Ways and Means Committee.
Mr. HERN. Mr. Speaker, on March 1, 2022, President Biden made a
promise to the American people during the State of the Union Address
before a joint session of Congress. I was sitting in this room as the
President stated: ``Under my plan, nobody earning less than $400,000 a
year will pay an additional penny in new taxes. Nobody.''
Mr. Speaker, the President lied to us all because, in August 2022,
CBO confirmed that the Democrats' Inflation Reduction Act, which
supercharges the IRS with 87,000 new agents, will, in fact, lead to
more audits and enforcement measures and higher taxes for families
making less than $400,000 a year. In fact, the CBO confirmed that
lower- and middle-income taxpayers would see as many as 710,000 more
audits.
Americans are suffering under harmful inflation caused by the
irresponsible fiscal policies from President Biden and our
congressional Democrats. The last thing the American people need is
burdensome IRS audits.
Mr. Speaker, I urge my colleagues to vote ``yes'' on this bill to
make Joe Biden's promise come true.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
Illinois (Mr. Davis), a very capable Member from Chicago.
Mr. DAVIS of Illinois. Mr. Speaker, I know this may be the beginning
of a new year, but we are back to the same old thoughts, ideas, and
practices: Protect the wealthy. Disadvantage the poor.
We need a tax system that is fair. We need the skilled auditors who
can look at the more complex returns of wealthy taxpayers and make sure
that they are paying their fair share.
There is no doubt that this is a sham. Vote this down because it
takes away opportunity for fairness in our tax system. We need the
auditors.
Mr. SMITH of Nebraska. Mr. Speaker, very briefly, I point out that
the Biden administration is not giving us all the information.
Secretary Yellen said that the IRS will not raise audit rates for
taxpayers making less than $400,000 ``relative to historic levels.''
What does ``historic levels'' really mean?
I include in the Record a CBO blog post from 2021 examining the Biden
administration's $80 billion proposal and stating that it would
``return audit rates to the levels of about 10 years ago'' and that
``the rate would rise for all taxpayers.''
[From the CBO Blog, Sept. 2, 2021]
The Effects of Increased Funding for the IRS
(By Phill Swagel)
Last month, the Congressional Budget Office published An
Analysis of Certain Proposals in the President's 2022 Budget.
Since then, CBO has completed its analysis of another
proposal in the President's budget, an increase in spending
for the Internal Revenue Service's (IRS's) enforcement
activities. CBO estimates that portions of the
Administration's proposal to increase funding for the IRS by
$80 billion over the 2022-2031 period would increase revenues
by approximately $200 billion over those 10 years. That
estimate does not include changes in revenues resulting from
portions of the proposal that involve new information-
reporting requirements and other changes to the tax code;
those changes are estimated by the staff of the Joint
Committee on Taxation (JCT).
the proposal
The Administration proposes funding for the IRS that is $80
billion greater over 10 years than the amounts in CBO's July
2021 baseline projections (which reflect the assumption that
current laws generally do not change). Two types of funding
would be provided: discretionary appropriations, which would
mainly be used for enforcement activities; and mandatory
funding, which would be used for a variety of activities (not
only enforcement but also operations support, business-
systems modernization, and taxpayer services).
Spending would increase in each year between 2021 and 2031,
though the highest growth would occur in the first few years.
By 2031, CBO projects, the proposal would make the IRS's
budget more than 90 percent larger than it is in CBO's July
2021 baseline projections and would more than double the
IRS's staffing. Of the $80 billion, CBO estimates, about $60
billion would be for enforcement and related operations
support.
The Administration also proposes that financial
institutions increase their reporting about account inflows
and outflows. Part of the increased funding would support the
implementation of a new information-reporting system to be
used by those institutions. The resulting effects on revenues
are estimated by JCT and are not included in CBO's estimate
of an approximately $200 billion increase.
how cbo estimates the effect on revenues of increased irs funding
CBO's estimate of revenues is based on the IRS's projected
returns on investment (ROIs) for spending on new enforcement
initiatives. The IRS estimates those ROIs by calculating the
expected revenues that would be raised from taxes, interest,
and penalties as a result of the new initiatives and dividing
them by their additional cost. (The agency has provided ROIs
over the past five years as part of its budget
justification.) The IRS's ROIs ramp up over three years as
staff become trained and fully productive, arrive at the peak
level, and then stay there. In recent years, peak ROIs have
ranged from 5 to 9. That is, a $1 increase in spending on the
IRS's enforcement activities results in $5 to $9 of increased
revenues.
CBO adjusts the ROIs so that they better reflect the
marginal return on additional spending. First, CBO expects
the IRS to prioritize the enforcement activities that it
thinks will have the highest average return; additional
enforcement spending would therefore have lower returns than
previous spending. Second, CBO expects taxpayers to adapt to
the IRS's enforcement activities and adopt new ways of
evading detection, so an enforcement activity may have a
lower return in later years. Finally, the productivity of the
IRS's enforcement activities will also depend on the IRS's
other capabilities. For example, modernized information
technology that stored all of a taxpayer's information in
digital form could increase the productivity of examiners
(the employees who detect taxpayers' noncompliance).
CBO's estimate of revenues also accounts for the timing of
collections resulting from enforcement activity by new hires.
Taxes are assessed at the end of an audit; if taxpayers
disagree with the assessment, they can appeal and continue to
litigate. The length of each step depends on the complexity
of the case. CBO estimates that an audit of medium complexity
would take 24 months to complete. That time, combined with
the expected training time for an experienced new hire,
suggests that the IRS would begin to collect revenues 30
months after the new hire joined the agency. (The timing
would be longer when cases were more complex or when the
taxpayer did not agree to the assessment and appealed.)
what is incorporated into cbo's estimate
CBO's estimate of the change in revenues is relative to the
amount of revenues collected under current law (which is
reflected in CBO's baseline budget projections). Under
guidelines agreed to by the legislative and executive
branches, this change in revenues typically would not be
included in a cost estimate for legislation that brought
about the change, but it would be reflected in CBO's baseline
budget projections once the legislation was enacted. CBO's
estimate reflects the assumption that the proposed
increase in funding would follow the proposed expansion of
information reporting. Expanded information reporting
might allow the IRS to better target potentially
noncompliant taxpayers; it might also prompt taxpayers to
file more accurate tax returns. It might have a positive
effect on revenues collected, but it might also reduce the
ROIs from enforcement activities, because if returns are
more accurate, there will be less noncompliance to audit.
In CBO's and JCT's judgment, those effects roughly offset
each other, on net, resulting in a small positive effect
on ROIs.
CBO's estimate includes ``direct revenues'' and ``protected
revenues.'' Direct revenues are generated from the IRS's
auditing and collection efforts. Protected revenues result
when the IRS prevents a taxpayer from recouping previously
assessed and paid taxes--for example, when the IRS prevents
fraudulent refunds or disallows claims in taxpayers' amended
returns.
The estimate reflects CBO's expectation that the increased
enforcement activities would change the voluntary compliance
rate--that is, the share of taxes owed that are paid
voluntarily and on time--only modestly. The magnitude of that
effect is highly uncertain, however, and the empirical
evidence about the effects of audits on taxpayers' behavior
is inconclusive. Research about such deterrence finds varying
responses, depending on the type of taxpayer. People
generally increase their reported income in the years
following an audit, but people with higher income generally
do not, and neither do corporations. (For more discussion,
see Box 1 in CBO's July 2020 report Trends in the Internal
Revenue Service's Funding and Enforcement.)
how the current analysis differs from previous analyses
In that July 2020 report, CBO estimated that a $40 billion
increase in enforcement funding would raise $103 billion (for
a net effect of $63 billion). The methods used for this
estimate differ in several ways from the methods used for
that one.
First, CBO used updated ROIs that incorporated the IRS's
most recent estimates of the return on enforcement
activities. CBO then adjusted the ROIs to reflect both direct
revenues and protected revenues, increasing the peak ROI from
6.4 to 7.1.
Second, CBO's current methods allow for positive
interaction between enforcement spending and other IRS
funding. That is, CBO accounts for ways in which increased
capabilities, such as more digitization of
[[Page H87]]
taxpayers' information and greater visibility of income
flows, can increase the productivity of enforcement
activities.
Third, this analysis reflects a longer time frame for
receiving enforcement revenues because of the complexity of
audits associated with high-wealth individuals, large
corporations, and partnerships. Taxpayers with greater
resources may be more likely to appeal assessments or to
litigate their disputes in the U.S. Tax Court, delaying the
receipt of assessed taxes. As a result, revenues from some
audits will not be received until later than CBO estimated in
its July 2020 analysis.
sources of uncertainty
The change in revenues resulting from an increase in the
IRS's funding could be different from CBO's estimate. It
depends on the IRS's ability to hire experienced candidates,
changes in voluntary compliance, and the interaction of
enforcement funding with the IRS's other capabilities.
The IRS intends to hire mid- and senior-level people with
private-sector experience who will not require a great deal
of training to become productive. But it might not be able to
hire its desired mix of candidates. If it hired less
experienced candidates, it would have to spend more resources
training them. Not only would they take longer to become
productive, but current staff members would have to devote
more time to training them. A related source of uncertainty
in CBO's estimate is attrition: If it proved higher than
expected, personnel would have fewer years at full
productivity.
An increase in the IRS's funding could signal that the
agency was more capable of detecting noncompliance, thus
increasing voluntary compliance and revenues. However, if
there were fewer noncompliant taxpayers to audit, the ROIs
from the IRS's enforcement activities would drop, and the
direct revenues from increased enforcement would be lower
than CBO estimated.
Finally, it is unclear how much the greater information
reporting or the increased IRS spending in areas other than
enforcement (such as technology) could improve examiners'
productivity. Greater nonenforcement spending might increase
overall revenues but decrease ROIs--for example, if improved
services for taxpayers enabled those taxpayers to more
accurately determine their tax liability, reducing the pool
of noncompliant taxpayers to audit.
effects on taxpayers
The proposed increase in spending on the IRS's enforcement
activities would result in higher audit rates than those
underlying CBO's baseline budget projections. Between 2010
and 2018, the audit rate for higher-income taxpayers fell,
while the audit rate for lower-income taxpayers remained
fairly stable. In CBO's baseline projections, the overall
audit rate declines, resulting in lower audit rates for both
higher-income and lower-income taxpayers. The proposal, by
contrast, would return audit rates to the levels of about 10
years ago; the rate would rise for all taxpayers, but higher-
income taxpayers would face the largest increase. In
addition, the Administration's policies would focus
additional IRS resources on enforcement activity aimed at
high-wealth taxpayers, large corporations, and partnerships.
CBO estimates that if the proposals were enacted, tax
compliance would be improved, and more households would meet
their obligation under the law.
Higher audit rates would probably also result in some
audits of taxpayers who would later be determined not to owe
additional taxes. However, the Administration's proposal for
more information reporting, as well as additional spending on
IRS technology, might reduce the burden on compliant
taxpayers by allowing the IRS to better target noncompliant
ones and to reduce the number of audits that resulted in no
change in tax assessment.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the
gentlewoman from West Virginia (Mrs. Miller), a member of the Ways and
Means Committee.
Mrs. MILLER of West Virginia. Mr. Speaker, I rise in support of the
Family and Small Business Taxpayer Protection Act.
The last 2 years under Democrat rule have resulted in terrible
policies and more unnecessary taxes for the American people. Americans
have been feeling the weight of destructive policies since their first
day in power, and now it is time for our Republican majority to fix
this mess.
The pressure on American taxpayers has continued to increase since
the passage of the so-called Inflation Reduction Act when they gave $80
billion of new funding for the IRS to hire the 87,000 new agents to
needlessly audit families and small businesses that are forced to fund
the out-of-control spending and misguided Green New Deal priorities.
How do more audits and scrutiny from the IRS benefit hardworking
Americans? Liberals in Congress chose to target American taxpayers by
supercharging the IRS, which solely focuses on auditing the hardworking
Americans who already pay more than their fair share. This is
unacceptable and must be reversed.
Through the Inflation Reduction Act, Democrats used the tools of the
IRS as a means to increase reckless spending.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from New
York (Mr. Higgins), an individual whose knowledge of the economic
system in America is unsurpassed.
Mr. HIGGINS of New York. Mr. Speaker, Charles Rettig, the former IRS
Commissioner, who was appointed by the Trump administration, said early
last year that the United States is losing $1 trillion in unpaid taxes
every year. He said the agency lacks the resources to catch tax cheats.
Most of the unpaid taxes, he said, are a result of evasion by wealthy
and large corporations.
With this legislation we are considering today, it is clear that the
GOP once again is putting tax-evading profits over people.
Mr. Speaker, I am asking my colleagues to join me in rejecting this
legislation to protect working families that play by the rules and
fight fairly every day.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 2 minutes to the
gentlewoman from California (Mrs. Steel).
Mrs. STEEL. Mr. Speaker, I rise in strong support of the Family and
Small Business Taxpayer Protection Act, and I am proud to co-lead this
important legislation with the gentleman from Nebraska (Mr. Smith), my
friend.
As millions of American families across the country struggle to
afford basic goods, from food to fuel--in large part thanks to the
inflation brought on by the absurd spending blowout of the last 2
years--the very last thing that taxpayers need is a bloated and
weaponized IRS.
Unfortunately, that is exactly what they got when the administration
rammed through $80 billion to hire 87,000 new IRS agents to harass and
spy on middle-class and low-income families, with most of 1.2 million
new additional audits.
The agency needs reform and modernization, but that is not what these
billions in taxpayer dollars did. Of the $80 billion, only $3.2 billion
was set aside for taxpayer services. Meanwhile, new audits and
enforcement got $45 billion.
The job of the IRS is to serve taxpayers, not target them. That is
why we must pass today's bill, which will rescind the IRS funding for
enforcement while leaving in place the funding for improvements to
customer service and technology.
Californians and all Americans deserve an accountable government and
a strong economy. An accountable government is one that serves its
citizens, not one that empowers bureaucrats to target taxpayers. We
will never build an economy that is strong by weaponizing government
agencies to cripple small businesses and employers.
Mr. Speaker, I urge all of my colleagues who support an accountable
government and a strong economy to vote ``yes'' on this legislation to
empower American families, support small businesses, and protect
taxpayers.
Mr. NEAL. Mr. Speaker, the challenge that was offered by the
gentlewoman from California is as simple as this: We are weaponizing
billionaires not to pay their fair share. That is what is happening.
What we are asking here is the simplicity of allowing people at the
very top to pay their fair share.
Mr. Speaker, I yield 1 minute to the gentlewoman from Alabama (Ms.
Sewell), a capable and valued member of the Ways and Means Committee.
{time} 2000
Ms. SEWELL. Mr. Speaker, I rise to speak against H.R. 23. The funding
provided through the Inflation Reduction Act is an important step to
address the lack of resources for the IRS so that they could do their
job.
How many of us have called the IRS and been on the phone waiting for
hours only to be told that you were being transferred to yet another
department and also continue to be waiting?
Over the past year, the IRS has already been cut by 15 percent, and
more cuts means more delays and lack of services for our constituents.
As Representative Neal said, the IRS failed to collect over $500
trillion last year alone because of lack of resources, lack of
[[Page H88]]
compliance, and the targeting of those people who are less fortunate
through the EITC compliance. They have been hurt.
Mr. Speaker, this is about tax compliance. This is also about racial
equity and fairness. Historically, African Americans have been
disproportionately audited by the IRS due to their claims of EITC. I
ask for fairness and equity and ask for my colleagues to vote ``no''
against this bill.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Utah (Mr. Moore).
Mr. MOORE of Utah. Mr. Speaker, today, we begin the work to reform
our government to work better for the American people and not against
them.
So what do I mean by that?
The last 2 years Democrats have had control of the White House,
House, and Senate, and they have passed and attempted historic spending
provisions. In order to do that, you have to raise revenue. This bill
became a ploy to leverage the IRS to be able to essentially do that
without directly raising taxes. That is what we are talking about here.
I represent thousands of IRS employees. They are some of the best,
most hardworking people in my entire district. As I talk to them, they
care about two major things: customer service, and that technology
needs to be improved. That is what I love about this bill because that
keeps that in here, and we actually want to focus our spending to be
able to directly support them.
As we put forth this bill, we are sincerely trying to take what all
of our constituents have been saying: We need the IRS to have more
support on customer service and technology.
That is why I urge everybody to vote ``yes'' on this bill.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from
California (Ms. Chu), a very capable member of the Ways and Means
Committee.
Ms. CHU. Mr. Speaker, I rise in strong opposition to this bill. It is
telling that the very first bill that the new Republican majority
brought to the floor aims to protect wealthy tax cheats from following
the law.
For a decade, Republicans succeeded in stripping the IRS of the
resources it needs to serve the American people, and the result has
been frustrating and harmful to workers and families, but it is
certainly fantastic for wealthy tax cheats who unfairly kept up to $1
trillion from the IRS every year.
Congressional Democrats reversed this trend when we passed the
Inflation Reduction Act. Now, the IRS will finally have the resources
it needs to properly audit wealthy taxpayers and corporations with
complex returns and ensure that average Americans don't have to wait
hours on the phone to fix problems.
Americans deserve an IRS that fulfills its most basic duty to ensure
all taxpayers and corporations follow the law and pay their fair share
in taxes.
Vote ``no'' on this bill.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the
gentlewoman from New York (Ms. Tenney).
Ms. TENNEY. Mr. Speaker, I rise in strong support of the Family and
Small Business Taxpayer Protection Act.
I am a small manufacturing businessowner, and I have also worked as a
tax attorney, so I know firsthand the kind of power that the IRS has
over our small businessowners and lower- and middle-income taxpayers.
Last year, to fund their leftwing agenda, the Democrats in Congress
decided to spend your hard-earned tax dollars on 87,000 new IRS agents,
making the IRS nearly the size of the U.S. Marine Corps.
The Biden administration claims these agents will not set their
sights on hardworking Americans. The facts reveal the opposite. The
Democrats claim these new audits will only affect Americans making over
$400,000. The facts prove otherwise.
However, the investment of $80 billion with over $40 billion being
spent for enforcement will exact just a fraction of the revenue they
hope to get to fund their spending sprees. The American taxpayers
deserve better.
The truth is their plan will target middle- and lower-income
taxpayers. The CBO agrees, and it released a finding that said
additional agents will lead to as many as 700,000 more audits on
Americans making less than $75,000 a year.
The core principle of our system of government is innocent until
proven guilty, not guilty until proven innocent as the IRS attempts to
do.
I encourage my colleagues to support H.R. 23.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from
Wisconsin (Ms. Moore), a very capable member of the Ways and Means
Committee.
Ms. MOORE of Wisconsin. Mr. Speaker, I rise to strongly oppose this
misnamed Republican bill, which purports to protect families and small
businesses, but instead, continues the unrelenting effort to starve the
IRS.
The only Americans that this legislation protects are tax cheats.
What is up with this conversation about how many agents are going to
be added?
The IRS has fewer agents today than it had in 1953, and our economy
is seven times larger, and our population has more than doubled since
then.
The characterization of the IRS as a militant government agency
deployed to harass unwitting small businesses and Americans is a
flagrant lie.
Our voluntary tax system depends on our taxpayers trusting that it
works fairly. We need to ensure that the IRS can examine complex tax
avoidance strategies of well-heeled individuals and businesses, period.
To do that, we need to help the agency modernize and transition away
from decades-old technology, and we must support the agency's capacity
to effectively administer a range of crucial tax benefits.
I urge my colleagues to vote ``no.''
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the
gentlewoman from Indiana (Mrs. Spartz).
Mrs. SPARTZ. Mr. Speaker, I will clarify what exactly this bill is
doing. Last year, Congress gave an additional $80 billion to the IRS on
top of $12 billion of existing funding, which increased the IRS' budget
by almost eight times.
This bill still keeps almost $10 billion in additional funding to
modernize IRS, which is still almost doubling their $12 billion budget
but eliminates over $70 billion of wasteful and egregious aggression
against the American taxpayer by the Federal Government.
As someone who spent over a decade in public accounting and also
started my own businesses, I never felt that we didn't have enough
government. On the contrary.
I hear the same message when I go all across my district--small
businesses and entrepreneurs have a hard time surviving.
I hope my Democrat colleagues will also support this commonsense
adjustment to relieve the undue burden on American families.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
Michigan (Mr. Kildee).
Mr. KILDEE. Mr. Speaker, I thank Mr. Neal for yielding. The Inflation
Reduction Act was a huge step toward lowering healthcare costs and
energy costs for families all across the country and creating new jobs
in my home State of Michigan.
It was fully paid for by making sure the biggest corporations and the
wealthiest individuals paid their fair share in taxes.
This funding for the Internal Revenue Service helps ensure that it
has the resources to go after those wealthy taxpayers that are avoiding
paying their fair share.
It is simply not fair that billionaires like Elon Musk and massive
companies like Amazon have paid less in Federal income taxes some years
than a Bay City teacher, a Saginaw nurse, or a Midland factory worker.
Further, the Inflation Reduction Act is helping to fight inflation,
bringing down costs for Americans.
With this bill, Republicans are trying to roll back these efforts to
fight inflation.
A vote against the motion to recommit that I will offer is a vote
against the Inflation Reduction Act.
Today, the nonpartisan Congressional Budget Office said this bill
will add $114 billion to the national deficit.
This is the first order of business for this majority.
Mr. Speaker, I ask unanimous consent to add the text of this
amendment in the Record immediately prior to the vote on the motion to
recommit.
[[Page H89]]
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Michigan?
There was no objection.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Virginia (Mr. Cline).
Mr. CLINE. Mr. Speaker, it is a bright, new day. Today, we begin to
deliver real results for the American people by passing legislation to
block the Biden administration from unleashing 87,000 new bureaucrats
and agents at the IRS on families and small businesses.
Last Congress, Democrats voted to supercharge the IRS with $80
billion of taxpayer money focused on IRS enforcement and hiring more
auditors to squeeze taxpayers.
It is not just wealthy Americans. With that expanded audit capacity,
the IRS can squeeze more money out of middle- and lower-income families
and small businesses, as well.
The Democrats' American Rescue Plan called for the IRS to require
payment apps like Venmo and PayPal to report Americans who made over
$600 in transactions.
Imagine what 87,000 new agents will do.
Republicans want an IRS that works for taxpayers, not targets them.
That is why this bill leaves in place the IRS funding for improvements
to customer service and technology.
Because Americans demand and deserve a government that is
accountable, not to the powerful but to the people, repealing funding
for Biden's army of auditors is a great first step in the right
direction.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
Virginia (Mr. Beyer), a very successful businessman and entrepreneur.
Mr. BEYER. Mr. Speaker, I rise in opposition to this absurd
legislation. The bill before us will cut the necessary investments to
make the IRS more responsive to regular people, improve customer
service, and work through the IRS backlog.
In exchange for making the IRS less responsive to the people, the
bill is going to add $114 billion to the deficit, according to the CBO.
Why?
My Republican friends want us to believe that a horde of 87,000 armed
Federal agents are ready to kick in your doors for tax enforcement.
This is total nonsense, a fantasy, a fabrication that has been fact-
checked over and over again and always found false.
The real reason they are passing this bill is to protect wealthy tax
cheats like the former President from having their tax returns
scrutinized.
The richest 1 percent avoid paying $100 billion every year because we
don't fund the IRS.
Republicans' first priority is to help the very rich tax evaders at
the expense of their own regular American constituents.
I urge Members to vote against this misguided legislation.
Mr. SMITH of Nebraska. Mr. Speaker, may I inquire how much time is
remaining?
The SPEAKER pro tempore. The gentleman from Nebraska has 10 minutes
remaining. The gentleman from Massachusetts has 11 minutes remaining.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1\1/2\ minutes to the
gentleman from Pennsylvania (Mr. Meuser).
Mr. MEUSER. Mr. Speaker, I thank my friend from Nebraska for
yielding.
The idea, Mr. Speaker, of hiring 87,000 new IRS agents to close the
tax gap is misguided. I served as revenue secretary for the great
Commonwealth of Pennsylvania. We did, in fact, close a tax gap through
what proved to be very effective measures. These measures included
improving IT systems and processes, which truly determined tax evasion
from tax avoidance.
Largely taking the easy approach of hiring 87,000 new agents,
doubling the size of the IRS--I don't know who thinks that is a good
idea--does not improve the quality of information used to accomplish
the goal of collecting all tax revenues that are due. It will only
increase the number of audits, most often on innocent small businesses
and individuals.
As well, the CBO projection of $186 billion of increased revenue was
established before the administration said that only those above
$400,000 in income would be audited. Currently, nearly 90 percent of
the audits are conducted on small businesses and those making less than
$400,000.
How can you make a projection when your targeted audience is reduced
by 90 percent?
This is an absolutely flawed plan that will do nothing but increase
the size of government, increase audits on law-abiding businesses, and
fail to achieve its intended results. It is Big Government at its
worse.
According to the CBO, the hiring of these new IRS agents will also
cause audit rates to rise on all taxpayers. A bipartisan analysis found
that this increase in funding would result in 1.2 million more audits;
700,000 of them will target taxpayers making $75,000 or less. These new
IRS agents will not be targeting wealthy tax cheats as they claim. They
will be targeting everyday Americans.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
Pennsylvania (Mr. Evans), a very distinguished member of the Ways and
Means Committee.
{time} 2015
Mr. EVANS. Mr. Speaker, I rise in strong opposition to this
legislation that will cut major investments in the IRS that will help
American taxpayers receive the benefits they have earned. It is
important.
This tax cheat act would gut IRS funding to protect Republicans'
wealthy corporate investors. It is important to understand that I urge
my colleagues to reject the Republican tax cheat act.
It is important because this is politics above people. The reality is
this is not about people. This is really all about politics.
I thank Mr. Neal, who led this effort through the Ways and Means
Committee, and colleagues who fought for the importance of investment
in the IRS.
Mr. Speaker, I stand today to encourage people to say ``no.''
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Wisconsin (Mr. Grothman).
Mr. GROTHMAN. Mr. Speaker, I have a very high opinion of the
gentleman from Massachusetts, but what scares me in this bill are the
numbers.
Right now, the IRS has about 78,000 employees, of which about 10,000
are what they describe as agents. It is not surprising that is less
than you had in 1954 because, in 1954, nothing was computerized. Now,
the 1099s, the W-2s, they come in and automatically the computers show
whether they are on your return or not. If they are not on the return,
you get a letter from the IRS saying you owe X amount of money.
Now, we are going, in one bill, from 78,000 employees, adding an
additional 83,000. We have no idea how many of those are going to be
agents poking around, looking at people, but you have to figure it is
going to be an increase of five or six times what they already have.
Wisconsin and Massachusetts are States about the same size. You are
talking about adding 1,600 employees--assuming it is the same per
capita, about 1,600 new employees to Massachusetts and Wisconsin.
What are they going to do with 1,600 new employees? I mean, I can't
imagine. If you deal with the IRS, the way they deal with it, they do
things like: ``Well, you owe $20,000.'' You have to find a lawyer to
fight that.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. Mr. Speaker, I think part of that new recruiting class at
the IRS is going to simply answer the phones. That would be helpful, a
step in the right direction.
Mr. Speaker, I yield 1 minute to the gentleman from Illinois (Mr.
Schneider), a CPA who really knows something about compliance.
Mr. SCHNEIDER. Mr. Speaker, I rise today to urge my colleagues to
oppose this bill. It not only increases our national deficit by $114
billion, but it does so by helping the wealthiest avoid paying taxes
and transfers that burden onto the backs of hardworking Americans and
small businesses that follow the law and pay their taxes on time.
Here is my question: Why, on their very first day legislating with
their new majority, with their very first bill, is the top Republican
priority rewarding tax cheats with what is estimated
[[Page H90]]
to be nearly $200 billion in uncollected taxes over the next 10 years,
$200 billion in taxes not paid by the wealthiest, meaning additional
debt for everyone else?
The Inflation Reduction Act dedicated $46 billion to enforcement to
make sure corporations and wealthy individuals pay the taxes they owe,
not new taxes, not higher rates, simply ensuring everyone pays what
they owe.
Mr. Speaker, I urge my colleagues on the other side of the aisle to
oppose this outrageous tax scam.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from Texas (Mr. Fallon).
Mr. FALLON. Mr. Speaker, I rise to speak in favor of H.R. 23, which
would defund the $80 billion from the Inflation Reduction Act or, as I
call it, the inflation enhancement act, and thereby defund the hiring
of 87,000 new IRS agents, which would, in effect, double the agency.
Nary a one, not one, of my constituents has asked to hire 87,000 new
IRS agents, but, in fact, countless have asked if we can hire 87,000
new Border Patrol agents because there is a crisis and a catastrophe on
our southern border.
The last thing we want is to double an agency that is already bloated
and have them with these 87,000 new agents or, in military parlance,
five new divisions to harass, stalk, and otherwise terrorize law-
abiding American citizens.
Who is this going to really kick in the teeth? It is not going to be
the wealthy or the poor. It is going to be the small business owners
and the middle-class, hardworking Americans.
Do you want to start a new Congress and do it well? This is a great
bill, and I urge the passing of H.R. 23, the Small Business and
Taxpayer Protection Act.
Mr. NEAL. Mr. Speaker, a reminder that the 87,000 is over 10 years.
The $80 billion is over 10 years. That is $8 billion a year for
replacement of those who retire, who leave the service of the IRS.
Mr. Speaker, I yield 1 minute to the gentleman from California (Mr.
Panetta), another very capable member of the Ways and Means Committee.
Mr. PANETTA. Mr. Speaker, I rise in opposition to H.R. 23 because our
government needs the resources to go after wealthy tax cheats who
defraud the government.
Because people don't pay their taxes, the Federal Government is
cheated out of at least $400 billion each year. In fact, President
Trump's IRS Commissioner said that number could be as high as $1
trillion every year.
That significant source of revenue could go to paying our bills,
paying down our debt, and propping up the power of our purse. That is
exactly why we passed legislation last year that made significant
investments to crack down on tax cheats.
That funding will not be used for families or small businesses making
less than $400,000. Instead, it will be used to go after those who have
the wealth to pay their taxes but don't or those who can pay for armies
of accountants to get out of paying for what they should.
H.R. 23 rescinds that funding for that type of needed enforcement,
and that is why I oppose it. Our government should have the resources
necessary to ensure that it is not just the middle class that pays our
bills and pays our debt, but the wealthy tax dodgers pay their taxes,
just like play-by-the-rules, hardworking Americans.
Mr. SMITH of Nebraska. Mr. Speaker, I include in the record a CBO
post from 2021 examining the Biden administration's $80 billion
proposal and stating that ``CBO projects the proposal would make the
IRS' budget more than 90 percent larger than it is in CBO's July 2021
baseline projections and would more than double the IRS' staffing.''
[From CBO Blog, Sept. 2, 2021]
The Effects of Increased Funding for the IRS
(By Phil Swagel)
Last month, the Congressional Budget Office published An
Analysis of Certain Proposals in the President's 2022 Budget.
Since then, CBO has completed its analysis of another
proposal in the President's budget, an increase in spending
for the Internal Revenue Service's (IRS's) enforcement
activities. CBO estimates that portions of the
Administration's proposal to increase funding for the IRS by
$80 billion over the 2022-2031 period would increase revenues
by approximately $200 billion over those 10 years. That
estimate does not include changes in revenues resulting from
portions of the proposal that involve new information-
reporting requirements and other changes to the tax code;
those changes are estimated by the staff of the Joint
Committee on Taxation (JCT).
The Proposal
The Administration proposes funding for the IRS that is $80
billion greater over 10 years than the amounts in CBO's July
2021 baseline projections (which reflect the assumption that
current laws generally do not change). Two types of funding
would be provided: discretionary appropriations, which would
mainly be used for enforcement activities; and mandatory
funding, which would be used for a variety of activities (not
only enforcement but also operations support, business-
systems modernization, and taxpayer services).
Spending would increase in each year between 2021 and 2031,
though the highest growth would occur in the first few years.
By 2031, CBO projects, the proposal would make the IRS's
budget more than 90 percent larger than it is in CBO's July
2021 baseline projections and would more than double the
IRS's staffing. Of the $80 billion, CBO estimates, about $60
billion would be for enforcement and related operations
support.
The Administration also proposes that financial
institutions increase their reporting about account inflows
and outflows. Part of the increased funding would support the
implementation of a new information-reporting system to be
used by those institutions. The resulting effects on revenues
are estimated by JCT and are not included in CBO's estimate
of an approximately $200 billion increase.
How CBO Estimates the Effect on Revenues of Increased IRS Funding
CBO's estimate of revenues is based on the IRS's projected
returns on investment (ROls) for spending on new enforcement
initiatives. The IRS estimates those ROls by calculating the
expected revenues that would be raised from taxes, interest,
and penalties as a result of the new initiatives and dividing
them by their additional cost. (The agency has provided ROls
over the past five years as part of its budget
justification.) The IRS's ROls ramp up over three years as
staff become trained and fully productive, arrive at the peak
level, and then stay there. In recent years, peak ROls have
ranged from 5 to 9. That is, a $1 increase in spending on the
IRS's enforcement activities results in $5 to $9 of increased
revenues.
CBO adjusts the ROls so that they better reflect the
marginal return on additional spending. First, CBO expects
the IRS to prioritize the enforcement activities that it
thinks will have the highest average return; additional
enforcement spending would therefore have lower returns than
previous spending. Second, CBO expects taxpayers to adapt to
the IRS's enforcement activities and adopt new ways of
evading detection, so an enforcement activity may have a
lower return in later years. Finally, the productivity of the
IRS's enforcement activities will also depend on the IRS's
other capabilities. For example, modernized information
technology that stored all of a taxpayer's information in
digital form could increase the productivity of examiners
(the employees who detect taxpayers' noncompliance).
CBO's estimate of revenues also accounts for the timing of
collections resulting from enforcement activity by new hires.
Taxes are assessed at the end of an audit; if taxpayers
disagree with the assessment, they can appeal and continue to
litigate. The length of each step depends on the complexity
of the case. CBO estimates that an audit of medium complexity
would take 24 months to complete. That time, combined with
the expected training time for an experienced new hire,
suggests that the IRS would begin to collect revenues 30
months after the new hire joined the agency. (The timing
would be longer when cases were more complex or when the
taxpayer did not agree to the assessment and appealed.)
What Is Incorporated Into CBO's Estimate. CBO's estimate of
the change in revenues is relative to the amount of revenues
collected under current law (which is reflected in CBO's
baseline budget projections). Under guidelines agreed to by
the legislative and executive branches, this change in
revenues typically would not be included in a cost estimate
for legislation that brought about the change, but it would
be reflected in CBO's baseline budget projections once the
legislation was enacted.
CBO's estimate reflects the assumption that the proposed
increase in funding would follow the proposed expansion of
information reporting. Expanded information reporting might
allow the IRS to better target potentially noncompliant
taxpayers; it might also prompt taxpayers to file more
accurate tax returns. It might have a positive effect on
revenues collected, but it might also reduce the ROIs from
enforcement activities, because if returns are more accurate,
there will be less noncompliance to audit. In CBO's and JCT's
judgment, those effects roughly offset each other, on net,
resulting in a small positive effect on ROIs.
CBO's estimate includes ``direct revenues'' and ``protected
revenues.'' Direct revenues are generated from the IRS's
auditing and collection efforts. Protected revenues result
when the IRS prevents a taxpayer from recouping previously
assessed and paid taxes-
[[Page H91]]
for example, when the IRS prevents fraudulent refunds or
disallows claims in taxpayers' amended returns.
The estimate reflects CBO's expectation that the increased
enforcement activities would change the voluntary compliance
rate--that is, the share of taxes owed that are paid
voluntarily and on time-only modestly. The magnitude of that
effect is highly uncertain, however, and the empirical
evidence about the effects of audits on taxpayers' behavior
is inconclusive. Research about such deterrence finds varying
responses, depending on the type of taxpayer. People
generally increase their reported income in the years
following an audit, but people with higher income generally
do not, and neither do corporations. (For more discussion,
see Box 1 in CBO's July 2020 report Trends in the Internal
Revenue Service's Funding and Enforcement.)
How the Current Analysis Differs From Previous Analyses. In
that July 2020 report, CBO estimated that a $40 billion
increase in enforcement funding would raise $103 billion (for
a net effect of $63 billion). The methods used for this
estimate differ in several ways from the methods used for
that one.
First, CBO used updated ROIs that incorporated the IRS's
most recent estimates of the return on enforcement
activities. CBO then adjusted the ROIs to reflect both direct
revenues and protected revenues, increasing the peak ROI from
6.4 to 7.1.
Second, CBO's current methods allow for positive
interaction between enforcement spending and other IRS
funding. That is, CBO accounts for ways in which increased
capabilities, such as more digitization of taxpayers'
information and greater visibility of income flows, can
increase the productivity of enforcement activities.
Third, this analysis reflects a longer time frame for
receiving enforcement revenues because of the complexity of
audits associated with high-wealth individuals, large
corporations, and partnerships. Taxpayers with greater
resources may be more likely to appeal assessments or to
litigate their disputes in the U.S. Tax Court, delaying the
receipt of assessed taxes. As a result, revenues from some
audits will not be received until later than CBO estimated in
its July 2020 analysis.
Sources of Uncertainty. The change in revenues resulting
from an increase in the IRS's funding could be different from
CBO's estimate. It depends on the IRS's ability to hire
experienced candidates, changes in voluntary compliance, and
the interaction of enforcement funding with the IRS's other
capabilities.
The IRS intends to hire mid- and senior-level people with
private sector experience who will not require a great deal
of training to become productive. But it might not be able to
hire its desired mix of candidates. If it hired less
experienced candidates, it would have to spend more resources
training them. Not only would they take longer to become
productive, but current staff members would have to devote
more time to training them. A related source of uncertainty
in CBO's estimate is attrition: If it proved higher than
expected, personnel would have fewer years at full
productivity.
An increase in the IRS's funding could signal that the
agency was more capable of detecting noncompliance, thus
increasing voluntary compliance and revenues. However, if
there were fewer noncompliant taxpayers to audit, the ROIs
from the IRS's enforcement activities would drop, and the
direct revenues from increased enforcement would be lower
than CBO estimated.
Finally, it is unclear how much the greater information
reporting or the increased IRS spending in areas other than
enforcement (such as technology) could improve examiners'
productivity. Greater nonenforcement spending might increase
overall revenues but decrease ROIs--for example, if improved
services for taxpayers enabled those taxpayers to more
accurately determine their tax liability, reducing the pool
of noncompliant taxpayers to audit.
Effects on Taxpayers
The proposed increase in spending on the IRS's enforcement
activities would result in higher audit rates than those
underlying CBO's baseline budget projections. Between 2010
and 2018, the audit rate for higher-income taxpayers fell,
while the audit rate for lower-income taxpayers remained
fairly stable. In CBO's baseline projections, the overall
audit rate declines, resulting in lower audit rates for both
higher-income and lower-income taxpayers. The proposal, by
contrast, would return audit rates to the levels of about 10
years ago; the rate would rise for all taxpayers, but higher-
income taxpayers would face the largest increase. In
addition, the Administration's policies would focus
additional IRS resources on enforcement activity aimed at
high-wealth taxpayers, large corporations, and partnerships.
CBO estimates that if the proposals were enacted, tax
compliance would be improved, and more households would meet
their obligation under the law.
Higher audit rates would probably also result in some
audits of taxpayers who would later be determined not to owe
additional taxes. However, the Administration's proposal for
more information reporting, as well as additional spending on
IRS technology, might reduce the burden on compliant
taxpayers by allowing the IRS to better target noncom pliant
ones and to reduce the number of audits that resulted in no
change in tax assessment.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the
gentlewoman from New York (Ms. Malliotakis).
Ms. MALLIOTAKIS. Mr. Speaker, at a time when we should be tightening
our belts, Democrats plan to spend $80 billion on 87,000 IRS agents,
doubling the size of the department.
This is meant to nickel-and-dime, audit, and harass America's small
businesses and families, who they know cannot afford the legal fees to
fight this army.
Mr. Speaker, 87,000 IRS agents but we only have 20,000 Border Patrol
agents and an unprecedented crisis with terrorists, convicted
criminals, and illegal immigrants crossing, in addition to fentanyl. We
only have 5,000 drug enforcement agents to stop traffickers who are
peddling this poison to our kids, the number one killer of young
Americans.
Mr. Speaker, 87,000 IRS agents is more than twice the size of the FBI
and more than the entire staff of the Department of Justice.
We know that our colleagues on the other side love taxes, spending,
Big Government, and bureaucracy, but the American people don't. That is
why we should be voting ``yes'' on this legislation today.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Gomez), not only a very capable member of the committee
but, last week, during those 4 days here of utter chaos, he carried
that child around this Chamber. During those 4 days, I think the child
grew by 2 inches. That is how long we were there.
Mr. GOMEZ. Mr. Speaker, in 2017, Republicans handed out tax breaks
for the largest corporations and the ultrawealthy, including Donald
Trump, who paid zero Federal income tax in 2020 and left the Presidency
without a single audit.
What we were trying to do was make it a fairer tax system where the
ultrawealthy were actually paying their fair share, which, as we saw
through the simple release of those tax returns for the President of
the United States, there were some years he paid zero. He was less
likely to be audited than somebody getting the earned income child tax
credit.
This is something that we need to fight against.
We want to make sure that our colleagues on the other side of the
aisle understand that it is not just about the ultrawealthy. It is
about working-class Americans. It is a shame that my colleagues on the
other side of the aisle care more about those who have higher income,
those who can hire lawyers that can get them out of paying taxes, but
we should really have a tax system that benefits everybody.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the
gentlewoman from Texas (Ms. De La Cruz).
Ms. DE LA CRUZ. Mr. Speaker, I am proud to stand here today as a
single mother and a small business owner in support of the Family and
Small Business Taxpayer Protection Act.
One of the most outrageous provisions in the Democrats' hyperpartisan
Inflation Reduction Act was giving the IRS $72 billion to hire an
additional 87,000 agents. Look, the hiring of 87,000 new IRS agents
only squeezes American taxpayers, including small business owners like
myself, the backbone of our communities.
My colleagues on the other side, let me tell you this: I live and
work and now represent a border district that houses a Border Patrol
sector. They need feet on the ground. They have the same number of
agents on the ground as compared to 3 years ago. Why aren't you
fighting that hard for these agents?
The Biden administration will tell you that they have increased
agents, but they have only increased agents in the processing and
administration, which ultimately has led to the mental health
deterioration.
The American people deserve a government that works for them, not
against them.
The SPEAKER pro tempore. Members are reminded to direct their remarks
to the Chair.
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from Texas
(Ms. Jackson Lee).
Ms. JACKSON LEE. Mr. Speaker, let me rename this legislation to the
billionaire tax cheats happy days are here again because that is simply
what this bill is about.
[[Page H92]]
I know my constituents are in one of the difficult districts in the
Nation, and I realize that small businesses in my district, those who
are getting earned income tax credit, they want refunds. They can't get
them if the phones are not being answered and there are not enough
staff to help them get the refunds that will help them propel their
small business into the next year.
Then, of course, Mr. Speaker, what about the lady who was trying to
close a real estate deal, and there was no one at the office? That
created a $68,000 tax burden because the tax office was not available
to assist.
We need to provide those workers to help Americans, not to create tax
cheats.
This legislation is deserving of opposition because we as Democrats
are trying to make the IRS work for working families, get their
refunds, get their dollars, help them propel into the next year, and be
better for the moneys that they deserve to get back.
Vote ``no'' on the underlying legislation.
Mr. Speaker, I rise in strong opposition to H.R. 23, the Family and
Small Business Taxpayer Protection Act. This bill would rescind $72
billion of the $79.6 billion appropriated to the Internal Revenue
Service to refine its services and technology and reform its
enforcement practices of the federal tax code. The passage of H.R. 23
would widen the already massive tax gap and unfairly relieve the
wealthiest 1% of Americans from paying their fair share of taxes.
The historic passage of the Inflation Reeducation Act under the
leadership of Speaker Pelosi and signed by President Biden authorized
$79.6 billion to allow the Internal Revenue Service to bolster taxpayer
services while firmly and fairly enforcing the federal tax code.
Through the implementation of the IRA, we continue to help the
millions of Americans who most depend on federal government assistance
and who contribute disproportionately to the federal revenues that pay
for our government to operate.
$45.6 billion of the authorized funds included in the Inflation
Reduction Act were allocated for tax enforcement activities, including
hiring more enforcement agents, providing legal support, and investing
in investigating technologies.
These funds are necessary to bridge the unjust tax gap that Americans
have been subject to for generations and will continue to endure under
Republican leadership.
The entirety of the $79.6 billion is critical to cracking down on
ultra-rich and corporate tax evaders who have avoided paying their fair
share of taxes for years.
The passage of this bill would dismantle key components of the
Inflation Reduction Act that have injected fairness into the
enforcement of our tax system.
The IRA reduced rising costs for hardworking middle-class and working
class families and ensured that taxpayers are not left to foot the bill
for ealthy tax cheats--both of which would be erased with the passage
of this bill.
These unfair tax practices have gone on for far too long.
I urge all my colleagues to oppose this bill and see it for what it
truly is:
an effort by Republicans to give tax breaks to the ultra-rich and the
corporations who fund their campaigns, and
an effort to continue carrying out their distorted notion of America
by decimating the programs set in place to help the Americans who
depend on government assistance the most.
Mr. SMITH of Nebraska. Mr. Speaker, I yield 1 minute to the gentleman
from New York (Mr. Lawler).
Mr. LAWLER. Mr. Speaker, only in Washington can one defend doubling
the size of the IRS and spending $80 billion to hire 87,000 new IRS
agents.
According to my friends across the aisle, that is a good thing
because the billionaires and the millionaires don't pay their fair
share. Yet, according to the IRS, the top 25 percent of income earners
pay 89 percent of all income taxes.
Does anyone really believe that the 87,000 new IRS agents and
employees are going to really stop there? Of course not.
How else will the Democrats fund their out-of-control and reckless
spending? There aren't enough billionaires and millionaires in the
United States to pay for it.
My friends on the other side will do what they always do. They will
target hardworking taxpayers, families, and small businesses that are
the lifeblood of our economy. It has to stop.
Coming from a State like New York, we need to cut taxes. We need to
reduce the cost of living and make it more affordable for our
hardworking families.
Mr. Speaker, I proudly support this legislation and urge all of my
colleagues to vote ``yes'' and end the 87,000 new IRS agents that are
going to terrorize hardworking Americans.
{time} 2030
Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Sherman), who is a CPA, I believe.
Mr. SHERMAN. Mr. Speaker, for 3 days and 3 long nights, every class
of Republican came to this floor to argue about which of them hated the
national debt more. Now, as the first thing, they bring forth a bill
that will increase the national debt by $1.6 trillion, according to six
bipartisan Secretaries of the Treasury.
Working people can't evade taxes. They get W-2s and 1099s.
Republicans support this bill, because every time a billionaire
successfully cheats on his taxes, a member of the Freedom Caucus earns
his wings.
As co-chair of the bipartisan CPA Caucus, and former head of the
second largest tax agency in America, I say we need staff to put the
Service back into the Internal Revenue Service.
One employee for every 2,000 tax returns filed, that is the staffing
level that Ronald Reagan insisted upon. It is the level Democrats would
restore.
Trump took outrageous positions on his returns, and counted on a
light audit. Whereas Ronald Reagan paid his taxes and staffed the IRS.
Don't make honest taxpayers feel like suckers. Stand with Ronald
Reagan and vote ``No.''
Mr. SMITH of Nebraska. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise with concern about some of these points that have
been raised. I think we have heard it from both sides that the IRS is
not answering the phone like they should, to actually serve the
taxpayers, taxpayers who want to do the right thing.
It is conceivable that there would be taxpayers overpaying as well
because of the complexity in the tax code, and yet the record shows
over the years that there have been innocent taxpayers, taxpayers who
already paid what they owed, who were still audited and were considered
guilty until they proved themselves innocent. To me, that is a huge
problem.
We just heard that there is concern about the debt, and yet the
answer is just more government employees, in fact, more than double of
what the current number of employees are. I have huge concerns about
that, and that is why I think we need to vote for this bill, get the
President and the Senate to agree to this, and work together to focus
on customer service issues that everyone knows are a concern at the
IRS.
I hope that, again, this use of technology can really lead the way
with a goal of customer service, rather than just hiring more full-time
equivalent employees. I don't think that will actually result in the
efficiencies that some are claiming would supposedly raise the revenue
that it would.
I just think we need to adopt this bill, get this passed, and come
together after that, realizing that we can and should expect the IRS to
do better.
Mr. Speaker, I reserve the balance of my time.
Mr. NEAL. Mr. Speaker, as my friend, the gentleman from Nebraska
pointed out, with the Presidential audit system, Joe Biden overpaid his
taxes. I hope the Record will reflect that, that the Democratic
President overpaid his taxes, and the IRS wisely made sure that he had
the proper refund.
Mr. Speaker, I yield 1 minute to the gentlewoman from Ohio (Ms.
Kaptur), the longest serving woman in the history of Congress.
Ms. KAPTUR. Mr. Speaker, I rise in opposition to this Republican
green light to tax cheaters, billionaires, and giant corporations that
do not pay their fair share of taxes.
The average working person in our country pays a rate of about 25
percent. Billionaires pay under 5 percent. Every citizen and
corporation should take a pledge of allegiance to pay their fair share
of taxes. But Amazon, Chevron, AIG, and even Coca-Cola shirk their duty
to liberty. Jeff Bezos, Elon Musk, and Charles Koch prosper under
liberty's flag but cheat on their taxes.
[[Page H93]]
In what world is it fair that those in the top brackets can cheat the
system while hardworking Americans pay their fair share every day?
I can assure you, staff in our offices have answered over a thousand
calls since 2020 because the IRS doesn't have enough agents to do the
job. Properly funding the IRS will help to reduce the deficit, average
Americans will get answers and help, and tax cheaters will finally pay
their fair share.
Mr. Speaker, I include in the Record a laundry list of tax cheaters.
Amazon, Exxon Mobil, AT&T, Microsoft, Verizon, Chevron,
Bank of America, UPS, Nike, Coca Cola, Charter
Communications, AIG.
Jeff Bezos, Mark Zuckerberg, Bill Gates, Michael Bloomberg,
Larry Page, Sergey Brin, Steve Ballmer, Elon Musk, Rob
Walton, Charles Koch.
Mr. NEAL. Mr. Speaker, I yield myself the balance of my time for the
purpose of closing.
Mr. Speaker, this has been an edifying debate. But as Harry Truman
noted, let's just talk about the facts. Let's debunk the argument that
we are hiring 87,000 armed IRS agents to go knocking on doors in the
middle of the night.
This is a substantial investment in technology. This is a substantial
investment in customer service. Yes, the $80 billion is over 10 years.
That is $8 billion a year to improve customer service. That is what we
are talking about.
At least 8,000 agents retire from the IRS every year. We are simply
replacing them. You know, in our school systems back home, when 200
teachers retire, we replace 200 teachers. That is what we are doing
here with the IRS.
They make this preposterous argument that all of a sudden, next week,
87,000 armed--because you always have to use the language that is
incendiary enough to get people worked up around here--that 87,000
armed agents in the dark of night will be hounding innocent taxpayers,
despite what Janet Yellen said about no taxpayer making under $400,000
a year is going to be targeted.
Mr. Rossotti, the former IRS commissioner, not me, said at least $574
billion a year goes uncollected. He is a Democrat. A Republican IRS
commissioner, Mr. Rettig, who we worked with, said it might be a
trillion dollars a year that goes uncollected, a Donald Trump
appointee, who stated that and raised that issue a number of times in
front of the Committee on Ways and Means.
Let me make a point that I raised earlier. Tax compliance in a
representative democracy is a fundamental commitment to civilization
and first-class services.
So by not collecting this revenue, are we going to say down the road,
well, maybe we will cut Social Security; maybe we will cut Medicare;
maybe we will cut Medicaid; or maybe we will cut the American military.
Now, we all know that in this discussion that the facts are very
clear here. They have been upset with the IRS for a long period of
time. We all remember the Lois Lerner episode, even though the facts in
that case pointed out that the advocates on the right and the left were
audited at the same rate. That is a fact.
So as we close this argument out, let's stand up for the honest
taxpayers in America and make sure that the IRS that currently cracks
down on the EITC will be able to actually address some of the
complexities of modern tax law, which we all agree, by the way, the
system is far too complex, but I have been through that argument many
times here, as well.
This fear-mongering that you are hearing tonight about upgrading the
technology and software investments at the IRS for the purposes of
modeling for better tax compliance is just that. It is fear-mongering.
All we want is a set of rules that is applicable to all as it relates
to tax collection. This is not anything other than simply suggesting
that there is a fairness that is applied to the Internal Revenue
Service, so that they might address and make sure that those at the
very top are complying with the same laws we ask the wage earners
through withholding to address every single day.
Thanks for a spirited debate, Mr. Speaker, and to our friends on the
other side.
Mr. Speaker, I yield back the balance of my time.
Mr. SMITH of Nebraska. Mr. Speaker, I yield myself the balance of my
time.
Mr. Speaker, I appreciate the conversation that we have had here. I
think there is fundamental disagreement on what the real solutions need
to be; although, I think there is agreement that the current customer
service at the IRS is significantly underperforming.
Now, in 2019, in a bipartisan fashion, we passed the Taxpayer First
Act. In fact, our highly respected colleague, the late Representative
John Lewis, led the way on that, as well. This was about customer
service and reform at the IRS. Were there benefits from that? COVID got
in the way.
I think that does actually beg the question of what have been the
impacts of COVID on customer service at the IRS.
Mr. Speaker, I am concerned that when there are resources afforded
the IRS, they are just not used the way they can and should be,
especially as it relates to customer service and the honest taxpayers
that my colleague from Massachusetts references. We want to do
everything we can when the American people are doing the right thing,
for the right reasons, and abiding by the law. Yet they would still be
exposed to having to prove themselves again after they already did with
voluntary tax compliance. But here comes an audit. I vividly recall the
fact that in the 1990s, the IRS, as an agency, overstepped.
In fact, I believe it was President Clinton that even pulled back the
IRS somewhat because they were going after law-abiding, taxpaying
Americans who already did everything they were supposed to do.
That certainly establishes my concern about why we would see
legislation passed last year that would pretty randomly put forward
funding that I think will ultimately get in the way of these taxpaying
Americans who, like I said, already did everything they were supposed
to do, but yet they have to incur the expense.
Mr. Speaker, I urge the passage of this bill for good public policy,
and I yield back the balance of my time.
Ms. LEE of California. Mr. Speaker, I rise in strong opposition to
H.R. 23, which would gut the enforcement of our tax laws.
As part of the Inflation Reduction Act, Democrats fought hard last
year to help the IRS crack down on wealthy tax cheats like Donald
Trump.
But House Republicans want to make sure the IRS remains underfunded,
understaffed, and unable to catch the top one percent who hide over 20
percent of their income from the IRS each year.
Meanwhile, the working people who pay their taxes will wait longer
for tax refunds and assistance because of these cuts.
Do not let Republican talking points about IRS funding mislead you.
This bill will only help tax cheats avoid paying their fair share.
House Republicans are only protecting their fat cat allies like Donald
Trump.
Instead of catering to their billionaire friends, I urge my
Republican colleagues to prove they actually care about working people
by voting no on this bill.
Ms. McCOLLUM. Mr. Speaker, I rise in opposition of H.R. 23, the
Family and Small Business Taxpayer Protection Act.
Hard-working families pay 99 percent of the taxes they owe, while the
uber wealthy, the 1 percent, has the ability to hide more than 20
percent of their income from the IRS each year. Tonight, the first bill
I will vote on is designed to help the 1 percent avoid paying their
fair share. House Republicans are protecting sophisticated tax cheats
and greedy corporations, and they do so under the guise of cutting the
budget of the Internal Revenue Service.
My office has been working with many families who have experienced
financial hardship while waiting months for the IRS to process their
tax refunds--which are often thousands of dollars. Why? Because the
agency has less auditors than in 1954 and tax returns are processed on
computer systems designed more than 40 years ago. This is a direct
result of years of attacks and budget cuts by Republicans in Congress
and the Trump administration.
Last year, Democrats passed the Inflation Reduction Act which
includes investments to replace retiring taxpayer service workers and
update aging technology to increase efficiencies so hardworking
taxpayers can receive prompt refunds and service.
Republicans should be helping the Americans waiting on hold for hours
to get their tax refunds instead of making it easier for tax cheats to
skip out on paying their fair share.
Ms. JACKSON LEE. Mr. Speaker, I rise in strong opposition to H.R. 23,
the Family and
[[Page H94]]
Small Business Taxpayer Protection Act. This bill would rescind $72
billion of the $79.6 billion appropriated to the Internal Revenue
Service to refine its services and technology and reform its
enforcement practices of the federal tax code. The passage of H.R. 23
would widen the already massive tax gap and unfairly relieve the
wealthiest 1 percent of Americans from paying their fair share of
taxes.
The historic passage of the Inflation Reeducation Act under the
leadership of Speaker Pelosi and signed by President Biden authorized
$79.6 billion to allow the Internal Revenue Service to bolster taxpayer
services while firmly and fairly enforcing the federal tax code.
Through the implementation of the IRA, we continue to help the
millions of Americans who most depend on federal government assistance
and who contribute disproportionately to the federal revenues that pay
for our government to operate.
Simply put, Americans who have the least should not be burdened with
the responsibility to contribute the most. Every American--most
importantly, the wealthiest among us--must pay what they rightfully owe
to enable our government to function.
$45.6 billion of the authorized funds included in the Inflation
Reduction Act were allocated for tax enforcement activities, including
hiring more enforcement agents, providing legal support, and investing
in investigating technologies.
These funds are necessary to bridge the unjust tax gap that Americans
have been subject to for generations and will continue to endure under
Republican leadership.
The entirety of the $79.6 billion is critical to cracking down on
ultra-rich and corporate tax evaders who have avoided paying their fair
share of taxes for years.
The passage of this bill would dismantle key components of the
Inflation Reduction Act that have injected fairness into the
enforcement of our tax system.
The IRA reduced rising costs for hardworking middle-class families
and ensured that taxpayers are not left to foot the bill for wealthy
tax cheats--both of which would be erased with the passage of this
bill.
These unfair tax practices have gone on for far too long.
I urge all my colleagues to oppose this bill and see it for what it
truly is:
an effort by Republicans to give tax breaks to the ultra-rich and the
corporations who fund their campaigns, and
an effort to continue carrying out their distorted notion of America
by decimating the programs set in place to help the Americans who
depend on government assistance the most.
The SPEAKER pro tempore. All time for debate has expired.
Pursuant to House Resolution 5, the previous question is ordered on
the bill.
The question is on engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit
Mr. KILDEE. Mr. Speaker, I have a motion to recommit at the desk.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. Kildee moves to recommit the bill H.R. 23 to the
Committee on Ways and Means.
The material previously referred to by Mr. Kildee is as follows:
Mr. Kildee moves to recommit H.R. 23 to the Committee on
Ways and Means with instructions to report the same back to
the House forthwith with the following amendment:
Add at the end the following:
SEC. 3. PREVENTION OF INFLATION INCREASE.
Section 2 shall not apply if the Secretary of the Treasury
certifies that such section will increase inflation for the
American people.
=========================== NOTE ===========================
January 9, 2023, on page H94, in the second column, the
following appeared: The Clerk read as follows: Mr. Kildee moves to
recommit H.R. 23 to the Committee on Ways and Means with
instructions to report the same back to the House forthwith with
the following amendment: Add at the end the following: SEC. 3.
PREVENTION OF INFLATION INCREASE. Section 2 shall not apply if the
Secretary of the Treasury certifies that such section will
increase inflation for the American people. The material
previously referred to by Mr. KILDEE is as follows: Mr. Kildee
moves to recommit the bill H.R. 23 to the Committee on Ways and
Means.
The online version has been corrected to read: The Clerk read as
follows: Mr. Kildee moves to recommit the bill H.R. 23 to the
Committee on Ways and Means. The material previously referred to
by Mr. KILDEE is as follows: Mr. Kildee moves to recommit H.R. 23
to the Committee on Ways and Means with instructions to report the
same back to the House forthwith with the following amendment: Add
at the end the following: SEC. 3. PREVENTION OF INFLATION
INCREASE. Section 2 shall not apply if the Secretary of the
Treasury certifies that such section will increase inflation for
the American people.
========================= END NOTE =========================
The SPEAKER pro tempore. Pursuant to clause 2(b) of rule XIX, the
previous question is ordered on the motion to recommit.
The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. NEAL. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to section 8 of rule XX, further
proceedings on this question are postponed.
____________________