Following the release of the much-anticipated spending plan for how the IRS intends to deploy the $80 billion appropriation granted by the Inflation Reduction Act (PL 117-169), some on the Hill are enthused about the agency’s direction while others expected more specific details.
Originally, the plan was going to be statutorily mandated by August’s inflation bill and due to Congress six months after its enactment. That requirement was scrapped in the final text, which prompted Treasury Secretary Janet Yellen to instead revive it in the form of a directive. Nonetheless, the IRS missed the February 17 deadline to produce its plan for spending the $80 billion over the next decade.
Incidentally, the IRS experienced turnover at its top since last summer, as former Commissioner Chuck Rettig departed the agency in November. Doug O’Donnell acted in an interim capacity while now-Commissioner Danny Werfel faced heat from antsy taxwriters on the Senate Finance Committee anxious to know when the plan would be released, as his confirmation process overlapped with the February due date.
With the plan now finally available to the public and Werfel assuming his new position in leading the IRS, lawmakers and think tanks have weighed in with initial reactions as to what they took away from the 150-page document that outlines spending objectives across the appropriation’s different categories, including customer service and compliance enforcement.
Among the harshest responses came from House Ways and Means Chair Jason Smith, Republican of Missouri. A prominent skeptic of the additional funding, Smith was disappointed upon seeing the plan, hoping to see more fine details on where the money will go.
“Americans are rightly concerned the IRS will use its $80 billion pay raise to go after the middle class, and today’s announcement does nothing to ease those concerns,” said Smith. “More than eight months after Democrats enacted the so-called Inflation Reduction Act, the IRS’s latest document offers no specifics for the agency over the next decade. If this is a ‘plan,’ why does it omit how many employees the agency seeks to hire over ten years, fail to identify target audit rates for taxpayers, and lack specific details about how the money will be spent beyond the next two years?”
Smith’s statement added that the plan is more of “a punt” than the exact roadmap many had wished for.
Several high-ranking Congressional Republicans have maintained that the funding would result in the hiring of 87,000 IRS agents tasked with ramping up audit rates across all tax brackets, and not just those above the $400,000 annual income threshold as promised by Treasury and IRS officials, including Yellen and Werfel.
Prior to the 2022 elections, current House Speaker Kevin McCarthy of California vowed to introduce a bill, should Republicans take the House, that would rescind the Inflation Reduction Act’s IRS funding. Sure enough, at the onset of the new Congress the Republican-controlled House approved a measure to do just that, dubbed the Family and Small Business Taxpayer Protection Act.
Adrian Smith, a Nebraska Republican on Ways and Means, saw the freshly released plan as all the more reason to claw back the enforcement portion of the funding—in total a little over half. “This spending plan is too little, too late,” said Smith in a statement. “Treasury blew through their February 17th deadline to release this plan, which shows just how unserious they are about assuring American families and small businesses they won’t be targeted under the $80 billion tax enforcement scheme in the Inflation Act. Instead, the IRS has doubled down on inserting itself into every aspect of Americans’ lives, at every opportunity.”
“Until the administration gets its priorities in order, no spending plan can alleviate the very serious concerns I have about what these dollars will mean for the everyday Americans who pay their taxes and strive to do the right thing,” he added.
The plan was more supported by Democrats like Rep. Bill Pascrell of New Jersey, who is the ranking member of the Ways and Means Oversight Subcommittee. Pascrell in his statement pointed to the progress that has already been made at the IRS on the customer support end. According to Pascrell, the IRS is answering more taxpayer phone calls this tax season and issuing refunds faster because of the funding, but he said much work yet remains.
“I am grateful for the leadership of Secretary Yellen and Commissioner Werfel in developing this aggressive plan to make tax administration in America better and ensure the 1% and corporations pay their fair share without clever abuses and avoidance,” said Pascrell. “As we approach the end of another tax season, I will continue to be relentless in my efforts to support dedicated IRS employees and bring an end to our nation’s two-tier tax system. Congressional Democrats and the Biden Treasury Department are moving with urgency toward that essential goal.”
Observation. On the topic of customer phone lines, in an audit of the IRS’ performance during the previous tax season, published a week before the spending plan, the Treasury Inspector General for Tax Administration (TIGTA) criticized the IRS for frequently automatically disconnecting calls when volumes were high at Taxpayer Assistance Centers. TIGTA recommended to the agency last year as the report was compiled that more should be done to keep callers on hold and placed in a queue instead of making them start the process over, or at least utilize callbacks more. Although at the time the IRS pushed back a bit, it should be noted that in the new plan, there is now a goal to provide a callback option for 95% of calls to live assistance lines by the end of July 2023. The IRS says that over the last year, a callback option was provided to 75% of calls.
Senate Finance Chair Ron Wyden, Democrat of Oregon, joined in commending Treasury and the IRS for the areas addressed in the plan, chiefly enforcement efforts to reign in tax evasion practices of high earners.
“The plan released by the IRS and Treasury Department today shows a clear focus on the priorities Democrats have laid out for this funding from the beginning,” Wyden said. “This plan makes it clear that no taxpayer making less than $400,000 would be targeted for additional audits.”
“The investments in service have been the first to go out, and they’re already helping to make this the smoothest tax filing season in many years, and that’s after spending less than 1 percent of the funding,” Wyden’s statement continued. “The bulk of this funding, however, will go toward building up the IRS’s capacity to root out cheating by sophisticated, wealthy individuals and companies with highly complex structures.”
Checkpoint reached out to the office of Senate Finance Committee Ranking Member Mike Crapo, Republican of Idaho, but did not receive a response by press time.
Chuck Marr, vice president for federal tax policy at the Center on Budget and Policy Priorities, took issue with some points raised against the plan. “I think it’s important to note the Republican response does not criticize what the IRS is going to do,” Marr told Checkpoint via phone on Friday. “Republicans do not criticize higher audit rates on wealthy people, large corporations, and partnerships in their response, which is an encouraging sign.”
National Taxpayers Union Foundation (NTUF) Director of Federal Policy Andrew Lautz told Checkpoint in emailed comments that there are “a lot of worthy goals embedded in the plan, and smart objectives underneath those goals, and chronological milestones for those objectives.” Yet, the plan lacks specific quantitative measurables, he said, echoing sentiments shared by NTUF president Pete Sepp, who called the plan a “starting point.”
Lautz posited that perhaps the IRS is keeping certain quantitative goals internal, “but if so, it would have been nice to see the IRS hold itself accountable to some specific performance metrics for the general public to see.”
National Taxpayer Advocate in a blog post April 6 indicated she is hopeful that this plan, “albeit general” in scope, will bring the IRS closer to realizing its stated goals echoed over recent months. “As always, the devil is in the details, and the proof is in the pudding. Developing a plan and successfully implementing it are two different things,” wrote Collins. “But, for the first time in my 40 years as a tax professional, the tax administration stars seem to be aligning.”
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