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POLICY INSIGHT
BEYOND THE NUMBERS

House GOP’s First Bill: A Misleading Gambit to Protect Interests of Wealthy Tax Cheats

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 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 (see chart).

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.