In one of its first actions, the new Republican majority in the U.S. House of Representatives moved to rescind most of the $80 billion funding allocated to the IRS by the Inflation Reduction Act, multiple news sources reported.
The money was intended to bolster the IRS by, among other things, hiring 87,000 new employees to improve tax collection and enforcement, close the tax gap, improve customer service and upgrade technology.
Under legislation introduced by Rep Adrian Smith (R-Neb.) and passed by the House, the proposed Family and Small Business Taxpayer Protection Act would take back all unspent money—about $71 billion, according to the Congressional Budget Office (CBO)—from the $80 billion with two exceptions: $3.2 billion for taxpayer services, which the IRS is using to hire thousands of customer-service representatives for the upcoming tax-filing season, and $4.8 billion for systems modernization. The legislation passed, 221-210, along party lines.
The rest of the money, designated for enforcement, operations, the inspector general’s office, the U.S. Tax Court and the Treasury Department, would be rescinded.
More money for enforcement could make audits less burdensome by ensuring that auditors have better training, technology and understanding of tax issues, former National Taxpayer Advocate Nina Olson told the Wall Street Journal.
“It’s not that the IRS is going to stop working” without the additional money, she said. “It’s just going to work in ways that’s going to harm taxpayers.”
The bill would "decrease receipts by $186 billion over the 2023-2032 period," the CBO estimated. It would also “[encourage] tax cheating, [expand] the tax gap, and [undermine] a policy supported by every President since Ronald Reagan, including Donald Trump,” the Committee for a Responsible Federal Budget said in its analysis.
The bill is unlikely to become law, as Senate Democrats, still in the majority, will almost certainly block its passage, and President Joe Biden has vowed to veto such a bill should it ever reach his desk. But the effort is an indication of House Republicans’ antipathy toward the agency.
“Our very first bill will repeal the funding for 87,000 new IRS agents,” Rep. Kevin McCarthy (R-Calif.) told the House in his inaugural speech as speaker. “You see, we believe government should be to help you, not go after you.”