ICYMI: Committee for a Responsible Federal Budget: IRS Funding Repeal Could Cost Over $100 Billion, Encourage Tax Cheating

Today, the Committee for a Responsible Federal Budget blasted House Republicans' first bill, which would help wealthy people and big corporations cheat on their taxes, saying "We estimate the bill would increase deficits by more than $100 billion over the next decade while encouraging tax cheating, expanding the tax gap, and undermining a policy supported by every President since Ronald Reagan, including Donald Trump."

According to a new CBO score, the House Republican bill would add $114 billion to the federal deficit by allowing super-wealthy and business tax cheats to avoid paying more than $180 billion in taxes.

Earlier today, the CFPB came out with additional analysis which rebuked the GOP bill, calling it "a misleading gambit to protect interests of wealthy tax cheats."

Read full blog below:

Committee for a Responsible Federal Budget: IRS Funding Repeal Could Cost Over $100 Billion, Encourage Tax Cheating
[01/09/2023]

The House is likely to vote today on a bill that would rescind roughly $70 billion of Internal Revenue Service (IRS) funding over the next decade. We estimate the bill would increase deficits by more than $100 billion over the next decade while encouraging tax cheating, expanding the tax gap, and undermining a policy supported by every President since Ronald Reagan, including Donald Trump.

Last year, the Inflation Reduction Act appropriated roughly $80 billion to the IRS to expand operational support, modernize systems, improve customer service, and strengthen tax enforcement. According to recent estimates, 13 percent of taxes owed are never paid – mainly because of underreported income and overreported deductions and credits. The Congressional Budget Office (CBO) estimated the new IRS funding would improve compliance modestly, generating about $180 billion of revenue through 2031.

Legislation currently under consideration in the House would rescind most of this new funding, leaving funds that have already been obligated as well as money earmarked exclusively for taxpayer services or business system modernization (but not funding for operational support, which could be used for those purposes). Although CBO has not scored the legislation, we estimate it would rescind roughly $70 billion and result in about $200 billion of lost revenue through 2032. As a result, it would increase deficits by well over $100 billion over a decade, including $30 billion in 2032 alone.

Although additional reforms and accountability measures to accompany new IRS funding could be constructive, there is little case for rescinding the money outright. Increasing funding for the IRS is one of the few ways to raise more revenue without raising taxes, and it has a long history of bipartisan support – including from every recent President from Ronald Reagan through Joe Biden. In fact, the legislation would reduce the IRS enforcement budget well below the level proposed by President Trump.

Even under good economic and fiscal conditions, it would make little sense to reduce revenue by allowing more individuals and businesses to avoid paying taxes they rightfully owe. With inflation high, interest rates rising, and debt approaching record levels, rescinding IRS enforcement funds would be a big mistake.