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Federal Tax

GOP Eyes Spending Bills as Vehicles for IRS Funding Clawbacks

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

Amid annual appropriation and Israel support negotiations now that the House speaker position has been filled, Republicans are seeking to rescind IRS funds from the Inflation Reduction Act to offset costs.

bill introduced October 30 from the House Rules Committee providing emergency aid to Israel would be paid for by clawing back $14.3 billion from the $80 billion, 10-year appropriation authorized to the IRS for customer service, enforcement, and operational improvements.

Many congressional Republicans have long been opposed to granting the IRS an additional appropriation beyond its usual annual budget over concerns that a “superfunded” tax collector would lead to increased audit scrutiny across all tax brackets, and not just those making over the $400,000 threshold put forth by the Biden administration.

Efforts have been made legislatively to rescind the inflation bill’s IRS appropriation, so far to no avail apart from the Fiscal Responsibility Act, which rescinded $1.4 billion out of the enforcement and operation pools. A handshake deal in between Biden and former Speaker Kevin McCarthy (R-CA) made earlier this year to prevent the US from hitting the debt limit may see the grand total be reduced to as low as around $60 billion.

Monday’s House bill would, for fiscal year 2024, would only send aid to Israel, and not also Ukraine. Recently sworn in House Speaker Mike Johnson (R-LA) said in an interview with Fox News that Israel is a more immediate concern than “IRS agents.” He signaled his intention to soon meet with Senate Majority Leader Chuck Schumer (D-NY) to “have a very direct and thoughtful conversation.”

“I understand [the Democrats’] priority is to bulk up the IRS, but I think if you put this to the American people and they weigh the two needs, I think they’re going to say standing with Israel and protecting the innocent,” said Johnson.

Earlier in October, Senator Rand Paul (R-KY) introduced an amendment to a so-called minibus of three appropriation bills that would rescind over $25 million from the IRS Inflation Reduction Act enforcement funds. Paul’s amendment, one of the over 40 to the minibus, reportedly needs 60 votes to pass unlike the majority of other amendments.

Senate Budget Committee Chair Sheldon Whitehouse (D-RI) lambasted Paul’s proposal in an October 17 statement. “Republicans’ priority always seems to be protecting big, tax-dodging donors,” said Whitehouse. “They try to jam these cuts into any bill they can. Their repeated efforts, which would drive up the deficit, show for whom Republicans are really fighting. When push comes to shove, they are always out to protect mega-donors who don’t want to pay what they owe, deficit be damned.”

Whitehouse asked the Congressional Budget Office to estimate the budgetary effects of taking the $25 billion out of the IRS’ hands, which has maintained this year in its Strategic Operating Plan that much of the enforcement funds will be targeted towards curbing tax evasion and closing the tax gap by going after the wealthy and large corporations.

The CBO reported back that doing so would increase federal deficits from 2024-2033 by nearly $24 billion. “That increase results from a decrease in outlays of $25.035 billion and a decrease in revenues of $48.797 billion,” the CBO explained.


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