The Internal Revenue Service (IRS) stands to collect an additional hundreds of billions of dollars in taxes over the next decade that would otherwise likely be dodged, thanks to the agency’s new efforts to crack down on corporations and the wealthy enabled by Democrats’ infusion of funding after a steady decrease in funding over past decades by conservative lawmakers.
According to a report released by the IRS and Treasury Department on Tuesday, the IRS could collect up to $561 billion in additional tax revenue between 2024 and 2034 due to the “transformational initiatives enabled by” the 2022 Inflation Reduction Act (IRA), as a press release on the report said.
If lawmakers renew and expand the IRA funding, as recommended by the Biden administration, that figure rises to an additional $851 billion in tax revenue, the report finds.
The estimate is based on an increase in tax enforcement for groups that are the most likely to dodge taxes: wealthy people and corporations, which are, by law, the target of the new efforts. This includes a decrease in the tax gap — or the difference between taxes owed and taxes paid — via audits on the richest households and large corporations, as well as the deterrence from dodging taxes that the increase in audits are likely to cause, the agencies find.
Officials directly cite the $80 billion in additional IRS funding passed by Democrats — and staunchly opposed by Republicans — as the reason behind the predicted revenue increase.
“This analysis demonstrates that President Biden’s investment in rebuilding the IRS will reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe,” said White House economic adviser Lael Brainard in a statement. “Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit.”
Indeed, Republicans’ meddling has already decreased the agency’s ability to go after wealthy and corporate tax cheats, the report finds. The $20 billion that Republicans have already successfully clawed back will lead to $100 billion less in taxes collected over the next decade, causing the funding to run out two years earlier than the IRA originally proposed.
Those who will benefit most from this are the ones who need the extra money the least. Funding cuts to the IRS have already caused a drastic decrease in tax enforcement for corporate and wealthy tax dodgers, who are able to use more sophisticated methods to outmaneuver tax agents.
The report found that, due to cuts, between 2010 and 2019 the audit rate of millionaires decreased by over 70 percent, while the audit rate of large corporations fell by more than 50 percent. As a result, the tax gap amounts to $600 billion each year.
Republicans have tried multiple times to nix the IRS funding influx — an effort now expanding across several years. They had opposed its inclusion in the original bill, voted last year to repeal $70 billion of the $80 billion increase, and this year got $20 billion of it eliminated as part of a deal to keep the government open. Democrats have said that the GOP’s ongoing and desperate efforts against the funding are a show of their priorities to protect their wealthy and corporate donors and friends.
On top of fighting tax enforcement, conservatives have also fought to keep the tax system skewed toward the wealthy. Recently, Republicans fought for a cut to the corporate tax rate that would hand corporations a massive tax break while offering a marginal expansion of the child tax credit. Meanwhile, a recent analysis by the Institute on Taxation and Economic Policy found the top 1 percent richest households pay a lower proportion of their incomes in state and local taxes than anyone in any other tax bracket in 41 states across the U.S.
Angry, shocked, overwhelmed? Take action: Support independent media.
We’ve borne witness to a chaotic first few months in Trump’s presidency.
Over the last months, each executive order has delivered shock and bewilderment — a core part of a strategy to make the right-wing turn feel inevitable and overwhelming. But, as organizer Sandra Avalos implored us to remember in Truthout last November, “Together, we are more powerful than Trump.”
Indeed, the Trump administration is pushing through executive orders, but — as we’ve reported at Truthout — many are in legal limbo and face court challenges from unions and civil rights groups. Efforts to quash anti-racist teaching and DEI programs are stalled by education faculty, staff, and students refusing to comply. And communities across the country are coming together to raise the alarm on ICE raids, inform neighbors of their civil rights, and protect each other in moving shows of solidarity.
It will be a long fight ahead. And as nonprofit movement media, Truthout plans to be there documenting and uplifting resistance.
As we undertake this life-sustaining work, we appeal for your support. Please, if you find value in what we do, join our community of sustainers by making a monthly or one-time gift.