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Republicans Vote to Revoke IRS Funding, Which Would Raise Deficit by $114B

The White House slammed the bill, saying the GOP has made it clear its top priority is to protect rich tax cheats.

Speaker of the House Kevin McCarthy arrives for a GOP caucus meeting at the U.S. Capitol on January 10, 2023, in Washington, D.C.

After a week-long scuffle over the House speakership, House Republicans held their first vote with their new majority on a bill to slash over $70 billion for the Internal Revenue Service (IRS) — funding that was pegged to allow the agency to go after wealthy tax cheats.

Republicans have specifically targeted the IRS funding that Democrats passed in last year’s Inflation Reduction Act, proposing cutting nearly 90 percent of the $80 billion in new funding that Democrats passed to recoup some of the budget deficits that the agency has suffered at the hands of Republicans over the years.

The bill passed on party lines, with a 221 to 210 vote. Democrats in the Senate have vowed not to take up the bill, and the White House vowed that President Joe Biden would veto the bill in a strong statement issued on Monday.

“Far from protecting middle-class families or small businesses, H.R. 23 protects wealthy tax cheats at the expense of honest, middle-class taxpayers,” wrote the Office of Management and Budget in a statement of administration policy, a firm way for the administration to state its official stance on legislation.

“With their first economic legislation of the new Congress, House Republicans are making clear that their top economic priority is to allow the rich and multi-billion dollar corporations to skip out on their taxes, while making life harder for ordinary, middle-class families that pay the taxes they owe,” the statement continued. “That’s their agenda; not lowering costs or cutting taxes for hard working Americans.”

Indeed, about $46 billion of the funding that would be revoked by the Republican bill is specifically earmarked for restoring the IRS’s ability to go after wealthy tax cheats. Tax dodging is extremely common among the richest Americans, who are able to use complex methods to hide their money from the government — and the IRS, underfunded and sometimes unable to perform basic tasks due to budget deficits, doesn’t have the resources to fully investigate and recoup those dodged taxes.

This leads to huge losses for the government. Treasury Secretary Janet Yellen said in 2021 that wealthy and corporate tax dodging has cost the government $7 trillion over a decade. For the GOP’s bill, the Congressional Budget Office (CBO) estimated on Monday that, while it would save the government $71 billion over the next decade, it would end up costing a revenue decrease of $185 billion — meaning that it would ultimately create a budget deficit of $114 billion.

However, Republicans have conveniently ignored the fact that their bill would add to the deficit, and that the extra funding would be used to target wealthy tax dodgers.

Instead, conservatives have been lying about what the funding is for, highlighting a recent report from Syracuse University researchers that found that the IRS audited the poorest Americans at the highest rate of any tax bracket in 2022, with relatively few audits for millionaires. Though the report specifically says the lack of audits of the rich are due to “severe budget cutbacks over the years,” Republicans have been lying about the findings, saying that the IRS targets poor Americans as a regular practice and would use the new funding to continue doing so.

“​​The very first bill passed by our new GOP majority rolls back $80 billion in funding Dems passed to create a supersized IRS with 87,000 new agents tasked with squeezing lower and middle-class taxpayers,” said Rep. Patrick McHenry, a Republican from North Carolina, repeating several lies about the IRS funding.

In reality, budget cuts have been led by Republicans over the past decades, and the GOP likely knows that this week’s bill would protect wealthy tax dodgers while eroding the government’s ability to raise revenue to sustain programs like Medicare and Social Security, which are also on the GOP’s chopping block.

In other words, over the past decades, Republicans have used budget cuts to ensure that the IRS couldn’t afford to audit anyone other than the poorest Americans, and are now using the grim results of those cuts to advocate for even more budget cuts.

Government watchdogs and progressive groups condemned the Republicans’ bill.

“If we want the IRS to audit the wealthiest 1 percent cheating us out of $160 billion each year instead of average taxpayers, we need to beef up funding for the IRS,” said Americans for Tax Fairness on Twitter. “The House GOP’s first priority is to defund the IRS because they want you to pay the price instead of their rich donors.”

The fact that this was the first bill the House passed under Republican rule is a show of the party’s priorities, others pointed out.

“It speaks volumes that House Republicans’ first bill in their new majority is focused on making it easier for the wealthiest Americans and biggest corporations to pay even less in taxes,” said Groundwork Action Executive Director Lindsay Owens in a statement. “Instead of working to tackle the corporate profiteering that is driving inflation and hurting working families, this new Congress is actively rewarding it and tilting the playing field even more toward massive corporations and the rich.”