Biden Administration Pushing for More IRS Funding

How do you even begin to fill the federal government’s coffers without raising taxes? Well, one way is to enforce existing tax laws. Most experts agree that is a tall task for the IRS at its current funding levels, and it appears many in D.C. have been listening.

The incentives are there and clear to anyone willing to look hard enough: every dollar “invested” in the IRS nets several dollars for the federal government. The Department of the Treasury estimates the ROI for IRS funding to be as high as 6:1. Interestingly enough, that figure doesn’t even cover the amount the IRS will gain through deterrence arising from a beefed-up budget. 

There are also plenty of political incentives for increasing the budget of the IRS. No matter a representative’s or senator’s political stripes—and, accordingly, their views on federal spending—raising taxes is seldom a winning message during election season. If D.C. creatures can raise money without raising taxes, they will certainly be interested. 

D.C. wonks rooting for the budget increase point to the money already being left on the table by not collecting on taxes owed. Around $388 billion, according to some estimates, is the difference between federal taxes owed each year and the amount the IRS actually collects. Economist Natasha Sarin and former Treasury secretary Larry Summers put the 10-year deficit at $7.5 trillion in a recent report. 

Here are some other quick facts:

  • The IRS lost 15 percent of its employees in the past decade
  • The number of IRS auditors has plunged 43 percent from 2010 to 2020
  • The agency’s budget is about 20 percent less than it was in 2010
  • Audits are at the lowest level in four decades
  • The number of criminal investigations opened by the IRS in 2020 was half of 2010’s totals
  • The money generated from IRS audits in 2020 was about a quarter of the cash obtained in 2012

If there are any doubts about the administration’s motivation for increasing the budget of the IRS, consider the timing of the leak from early June about the nation’s highest earners. ProPublica, a non-profit news organization focusing on investigative reporting, published a story on the meager income taxes paid by titans like Jeff Bezos and Elon Musk. The news organization mentioned that an anonymous source provided IRS data to reporters, but the timing—barely two weeks after the administration released its proposed budget—cannot be ignored. 

None of this is to say that Democrats on the Hill (and in the White House) are not interested in raising tax rates. Our May blog covered the potential changes to tax policy, which affect top earners and corporations. Naturally, though, negotiating points and red lines have changed since that blog’s publication. 

What This Means For You

Despite the administration’s focus on the wealthiest taxpayers, you shouldn’t assume you will be unaffected by any budget increases. Restaurant owners and real estate investors are two groups that, according to the IRS, are responsible for a large portion of uncollected taxes. Pass-through entities, in particular, can provide fertile ground for tax cheats. 

Weisberg Kainen Mark, PL is a Miami firm that focuses on helping taxpayers resolve their disputes with the IRS. No matter the venue—Tax Court, criminal court, or within the IRS—we can help you come up with an optimal strategy to resolve your tax matters. Give us a call today to discuss your options.

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Weisberg Kainen Mark, PL

As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.

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