The Internal Revenue Service says it could collect around $560 billion largely from rich tax cheats and big corporations over the next decade—as long as congressional Republicans don't succeed in clawing back a recent funding increase that allowed the agency to ramp up enforcement.
The Inflation Reduction Act (IRA), which President Joe Biden signed into law in 2022 without any Republican support, gave the IRS an $80 billion funding boost after years of budget cuts inflicted by the GOP.
The cuts severely compromised the agency's ability to audit the wealthy and big businesses, which often have more complex returns. According to an IRS and Treasury Department analysis released Tuesday, "the audit rate on millionaires fell by more than 70% from 2010 to 2019, and the audit rate on large corporations fell by more than 50% over the same period."
The IRA funding boost has given the agency much more capacity to pursue rich tax cheats. Last month, the IRS said it has collected more than $500 million from wealthy tax dodgers since 2022.
The new Treasury-IRS analysis estimates that if the IRA funding boost remains in place, federal revenue would increase by as much as $561 billion over the next 10 years—a significant return on the IRA's $80 billion investment.
"The administration has proposed extending and maintaining IRS investments after the IRA funds are exhausted, which would enable the IRS to collect $851 billion over 2024-2034," the agencies said.
But if $20 billion of the $80 billion funding boost is rescinded, the IRS would bring in over $100 billion less in revenue over the next decade than it would with the increase intact, the analysis shows.
"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," Lael Brainard, director of the White House National Economic Council, said in a statement Tuesday. "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."
As part of a debt ceiling agreement with Republicans last year, President Joe Biden and Democratic congressional leaders agreed to rescind $20 billion from the IRS funding boost enacted by the IRA—a deal that drew outrage from progressives.
Democratic and Republican lawmakers subsequently agreed to implement the $20 billion rescission all at once in 2024 instead of spreading out the cuts over two years, and House Speaker Mike Johnson (R-La.) has made clear that he intends to pursue additional IRS cuts, which would further undermine the agency's ability to crack down on tax dodging and modernize its technology.
"Anyone trying to rescind funding from the IRS just wants to let wealthy and corporate tax cheats off the hook," the advocacy group Americans for Tax Fairness wrote on social media Wednesday.