President Joe Biden will ask for $80 billion in funding for the Internal Revenue Service (IRS) over the next decade in order to crack down on wealthy and corporate tax evaders, according to The New York Times. He plans to use extra funds captured by this effort to help pay for his upcoming American Families Plan.
The funding for the IRS — which would be a large increase in its budget — would be paired with more authority for the agency. There would also be new disclosure requirements aimed at identifying situations in which wealthy people and people who own businesses that aren’t organized as corporations may be engaged in tax evasion.
Administration officials say the newly funded efforts by the IRS will, conservatively, raise at least $780 billion over the next 10 years due to enhanced audits and reporting requirements, reports The New York Times.
IRS head Chris Rettig told the Senate in a hearing earlier this month that the government misses out on $1 trillion every year in tax revenue because the agency lacks the resources to sniff out tax evaders and has lost 17,000 enforcement employees over the last decade. Most of the lost revenue is due to corporations and the wealthy evading taxes, Rettig said.
A report from March found that, due partially to cuts to the IRS’s budget and more sophisticated tax evasion tactics, there is “substantial evasion” of taxes from wealthy Americans, according to an analysis of IRS data by the National Bureau of Economic Research. The report found that the top 1 percent of earners dodge taxes on 21 percent of their income — and the researchers say their research likely underestimates the true extent of the problem.
Meanwhile, some economists say the IRS misses out on taxing the wealthy because it favors spending a disproportionate amount of time searching for people who inappropriately received the Earned Income Tax Credit, which many poor people benefit from, instead of finding rich tax evaders.
Because wealthy people and corporations can use complex and sophisticated techniques to hide their income, they take advantage of the IRS’s lack of funding by making it so that the agency would have to expend more resources than it has to figure out the full extent of the tax evasion, reports Esquire.
“Actual enforcement of the existing IRS regulations would be a wonderful thing to see, and something the finance industry needs to fear,” Center for Economic and Policy Research economist Eileen Appelbaum told the publication.
The president plans to use the increased revenue to fund his $1.8 trillion American Families Plan, which will include provisions like an extension of the child tax credit and free community college. The plan to capture more taxes is part of a slate of proposals from Biden’s administration to help pay for his two-part infrastructure package.
On top of the funding for the IRS, Biden is also planning to include a hike in the capital gains tax rate for people making over $1 million to help pay for the American Families Plan. His administration has included a moderate rise in the corporate tax rate and the top tax rate. The tax hikes all go toward the goal, the administration has said, of helping to lessen income inequality in the U.S.
Progressives, meanwhile, have been pushing Biden to go further in his plans to tax the wealthy and fund infrastructure projects. While Biden has only proposed raising the corporate tax rate to 28 percent, Sen. Bernie Sanders (I-Vermont) introduced a bill last month to raise the corporate tax rate to 35 percent, restoring it to the threshold it was at before Republicans under former President Donald Trump slashed it to 21 percent.
Progressives have also pointed out that Biden’s top marginal tax rate is relatively low compared to rates in the past. Biden plans to raise the top tax rate from 37 to 39.6 percent, but, as prominent economist Gabriel Zucman noted on Twitter, the top marginal tax rate was much higher for much of the 20th century, as high as 94 percent.
Join us in defending the truth before it’s too late
The future of independent journalism is uncertain, and the consequences of losing it are too grave to ignore. To ensure Truthout remains safe, strong, and free, we need to raise $27,000 in the next 24 hours. Every dollar raised goes directly toward the costs of producing news you can trust.
Please give what you can — because by supporting us with a tax-deductible donation, you’re not just preserving a source of news, you’re helping to safeguard what’s left of our democracy.