Sen. Elizabeth Warren (D-Massachusetts) unveiled legislation on Monday that would drastically increase the budget for the Internal Revenue Service (IRS) to reduce tax enforcement inequities and ensure the agency goes after wealthy tax evaders.
The Restoring the IRS Act of 2021 would provide the IRS with $31.5 billion a year in mandatory funding, over 2.5 times higher than its 2021 appropriated budget of $11.9 billion. The bill would also remove the IRS’s budget from the appropriations process to ensure its funding is consistent year by year.
“For too long, the wealthiest Americans and big corporations have been able to use lawyers, accountants, and lobbyists to avoid paying their fair share — and budget cuts have hollowed out the IRS so it doesn’t have the resources to go after wealthy tax cheats,” said Warren in a statement. “The IRS should have more — and more stable — resources to do its job, and my bill would do just that.”
Warren also pointed out that it was the GOP in particular that gutted the IRS and its budget over the years. Indeed, over the past decade or so, the IRS’s budget has decreased steadily thanks to Republican efforts to slash its budget and gut its operations. The IRS has lost tens of thousands of workers over the past decade and, as a result, conducts drastically fewer investigations and audits.
Officials estimate that the IRS misses out on as much as $1 trillion a year in uncollected taxes. The top 1 percent of earners are responsible for a large portion of this. A recent analysis found that the top 1 percent avoid taxes on 21 percent of their incomes, which could amount to as much as $5 trillion in lost revenue for the government over a decade.
Warren’s bill could fix that, she contends. “Our tax system shouldn’t be rigged for those who can hire armies of lawyers, lobbyists, and accountants. My bill would give the IRS the resources it needs to fairly enforce the tax code, modernize its IT systems, and improve taxpayer services,” Warren wrote.
A fact sheet on the bill points to a 2016 study, which found that for every dollar invested in IRS enforcement, the agency can get $24 back in revenue. The bill also specifies that the IRS must create a plan to focus renewed auditing efforts on wealthy people and corporations to help reduce inequalities in tax enforcement.
Currently, the IRS disproportionately goes after low-income taxpayers because the agency is “starved for resources” and low-income people are cheaper to investigate, Warren explained in a hearing earlier this month. The bill would require the agency to conduct an analysis of racial disparities in its enforcement and increase penalties for tax evaders with incomes above $2 million.
Warren’s bill is more ambitious than President Joe Biden’s plan to expand the agency. Biden has been fleshing out a plan to give the IRS $80 billion over the next decade, also with the goal of increasing enforcement. The agency would use the funding to hire 87,000 employees, effectively doubling its size.
While Biden administration officials have suggested that the agency’s efforts will be focused on corporations and the rich, Warren’s plan is more specific in its goal of cracking down on the top end of taxpayers.
In her time serving on the Senate Finance Committee, Warren has also proposed a wealth tax that’s aimed at taxing wealthy people. The bill introduces extra taxes for “ultra-millionaires,” as she puts it, implementing a 2 percent tax on wealth over $50 million and 3 percent on wealth over $1 billion.