Supercharged IRS Will Collect $20 Billion More From Americans Making Less Than $400,000 Under Inflation Reduction Act: Report

Supercharged IRS Will Collect $20 Billion More From Americans Making Less Than $400,000 Under Inflation Reduction Act: Report
Senate Majority Leader Chuck Schumer (D-N.Y.) speaks during a press conference about the Inflation Reduction Act, outside the U.S. Capitol in Washington on Aug. 4, 2022. (Drew Angerer/Getty Images)
Tom Ozimek

Republicans on the House Ways and Means Committee say they have received information from the nonpartisan scorekeeper at the Congressional Budget Office (CBO) challenging the Biden administration's narrative that Americans making less than $400,000 a year won't see higher IRS audit rates.

The remarks came in an Aug. 12 statement that was published as the Democrat-controlled House passed the Inflation Reduction Act, which includes nearly $46 billion in additional funding for IRS enforcement of the $80 billion or so total funding boost to the tax agency.
Committee Republicans said the CBO statement they were provided with confirms that, under the new legislation, lower- and middle-income Americans will be squeezed harder by the tax man to the tune of at least $20 billion.

'Supercharged IRS' Coming for Middle-Income Americans

This figure was arrived at by calculating how much less tax revenue would flow into government coffers if legislators had accepted amendment No. 5404 (pdf) proposed by Sen. Mike Crapo (R-Idaho) that explicitly called for none of the funds appropriated under the Inflation Reduction Act to be used to audit taxpayers earning less than $400,000 a year.

"The Congressional Budget Office (CBO) confirms that had this amendment passed and lower- and middle-income taxpayers been protected, revenue in Democrats’ bill would have been reduced by at least $20 billion," Committee Republicans said.

This confirms that "at least $20 billion of the $124 billion in new revenue expected by a supercharged IRS will be coming from higher audits on low- and middle-income Americans" and that this would be "in addition to existing audits on these income levels."

The CBO didn't respond by press time to a request by The Epoch Times for confirmation of the scorekeeper's assessment and comment.

'Absolutely Not' Increasing Audit Scrutiny?

Republicans said the CBO statement proves that members of the Biden administration are misleading the public by claiming that lower- and middle-income Americans won't face additional tax audits.
Treasury Secretary Janet Yellen has insisted Republican claims that tax auditors will target lower- and middle-income Americans at higher rates are false and politically motivated.
"I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” Yellen said in an Aug. 10 letter to IRS Commissioner Charles Rettig.

“This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”

Rettig, too, has insisted that the tax agency would “absolutely not” be increasing audit scrutiny on small businesses or middle-income Americans "relative to recent years," according to the IRS chief's letter to members of the Senate on Aug. 4 (pdf).

More Audits 'Almost Certain'

A previous CBO analysis indicated that, under basically the same funding plan as is featured in the Inflation Reduction Act, audit rates would be restored to levels around 10 years ago, and that audit rates would rise "for all taxpayers," though ones with higher incomes would face the biggest increase.
IRS audit rates have fallen sharply over the past decade, with the Government Accountability Office stating in a report that rates in 2019 were about one-third of those in 2010 for all income groups, dropping to 0.25 percent from 0.9 percent.
A CBO estimate (pdf) shows that the additional $80 billion in funding will bring in around $204 billion in new revenue, including from enforcement.

Despite Yellen's and Rettig's insistence that audit rates wouldn't jump for those making less than $400,000, Rachel Greszler, senior research fellow at the Grover M. Hermann Center, wrote in an op-ed for The Heritage Foundation that this likely isn't the case.

"Despite the Biden administration’s claims, it’s almost certain that households making less than $400,000 a year would face increased audits under Democrats’ bill," Greszler wrote.

"And despite estimates from official congressional scorekeepers that the Schumer-Manchin-Biden tax increase indeed would raise taxes on those Americans, the administration has doubled down on the claim."

Rep. Kevin Brady (R-Texas) said on the House floor that the way Democrats can manage to raise $200 billion in new tax revenues is "with thousands of new agents targeting what [he] would call Walmart shoppers."

"They’re real, hard-working American families. They are my constituents, they are my neighbors in my district. They’re living paycheck to paycheck, struggling with inflation and high gas prices," Brady said.

"They will be hit with over 700,000 new audits thanks to a skyrocketing surge in IRS agents."

"Higher taxes, harassing IRS audits on our Walmart shoppers, no relief from inflation—all as America battles a recession," he added.

The Inflation Reduction Act passed in a strictly party-line vote on Aug. 12, with the bill next heading to President Joe Biden’s desk for final approval.
Tom Ozimek is a senior reporter for The Epoch Times. He has a broad background in journalism, deposit insurance, marketing and communications, and adult education.
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