The $1.2 trillion, three-bill government spending proposal released by congressional appropriators January 20 would strip $11.6 billion from the IRS’ supplemental funding provided by the Inflation Reduction Act (IRA, P.L. 117-169).
This latest recission of the 2022 IRS funding is tucked in the middle of a thousand-page appropriations package that would fund the departments of Defense, Labor, Health and Human Services, Education, Transportation, Housing and Urban Development, and Homeland Security through September 30, 2026.
The majority of the IRA funding went to tax enforcement ($47.4 billion), with audit initiatives underway at the time that were intended to increase scrutiny on high-income individuals, large corporations, and complex partnerships. It also set aside $25.3 billion for operations support, such as administrative costs and rent. The remaining funds went towards customer service ($3.2 billion) and systems modernization ($4.8 billion).
But since the IRA, Congress has clawed back the additional funding, which was meant to last over a 10-year period. The cuts thus far have come from the enforcement bucket. As observed earlier this month by Andrew Lautz, director of tax policy at the Bipartisan Policy Center, Congress already rescinded nearly $42 billion, meaning the “enforcement funding is basically gone.” He added that $3.7 billion of the $15.8 billion spent by the IRS from the IRA pool was for enforcement.
In response to Tuesday’s release of the minibus text, Lautz noted that as written, the spending bill “would leave under $10 billion in IRS IRA funding.”
Tax Law Center Senior Fellow Greg Leiserson said in a statement that “record cuts in the IRS base budget” and the proposed “recission of funding for IT upgrades guarantee a worse taxpayer experience and more non-compliance.”
For perspective, Leiserson said the appropriations agreement “cuts base IRS funding, including enforcement, by over one-third relative to its 2010 level, adjusted for inflation. He expects that the remainder “would almost certainly be exhausted during the current administration” at “current spending rates.”
Since President Trump retook office last January, the IRS workforce went from over 100,000 employees to under 76,000, according to National Taxpayer Advocate Erin Collins in her mid-year report to Congress last June.
Vice President of Federal Tax Policy at the Center on Budget and Policy Priorities Chuck Marr posted that the agreement “is doubly bad for the IRS budget and honest taxpayers,” as it “comes at time when the IRS now has fewer auditors to audit wealthy people and corporations” than it did in the 1950s.
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