Published January 13, 2023
I was on hold with the Internal Revenue Service (IRS) for nearly an hour last year when I became decidedly aware of my toddler needing a diaper change. It was, perhaps, a little too on the nose as a metaphor.
Ronald Reagan once joked that government was a baby “with a healthy appetite at one end and no responsibility at the other.” And it seems a safe assumption that most taxpayers would opt for the dirty diaper over having to deal with the unavoidable mess that is the bureaucracy of the IRS.
So, to a large degree, House Republicans can’t be blamed for having their first, highly visible piece of legislation be a futile attempt to rescind the additional funding for the IRS included in last year’s Inflation Reduction Act. It will certainly not receive a favorable hearing in the Democrat-controlled Senate, much less be signed by President Joe Biden, but most GOP members know standing against taxes (and the federal tax agency) plays well with the Republican base.
But while the reflexive small-government ideology of many conservatives made picking a fight over the IRS inevitable, there are legitimate reasons to drop the issue – including a recognition that a movement of the working class might welcome slightly more efficient government services and care a little less about rates of tax audits on the wealthy.
For example, Republican Rep. Roger Williams of Texas proudly tweeted that “House Republicans’ major first act in the new majority was to repeal the Democrats’ army of 87,000 IRS agents. Americans deserve a government that works for them, not agents set out to target small businesses and low- and middle-income families.” Similarly, in his first remarks as House speaker, Kevin McCarthy said his majority believes “the government should be here to help you, not go after you.”
That choice of words is inadvertently revealing. For decades, elected Republicans have espoused a version of Reagan’s famous quip that the “nine most terrifying words in the English language are ‘I’m from the government and I’m here to help’.” The Tea Party movement was successful in getting Congress to cut IRS funding, with the implicit theory that if they made dealing with the government more painful, they would increase the public’s opposition to higher tax burdens.
But the sentiment expressed by McCarthy indicates a new rhetorical openness to the idea that government should be responsive to people, rather than just being small enough to drown in a bathtub.
Even on its own terms, the additional funding for the IRS in the Inflation Reduction Act isn’t the assault on American taxpayers some on the right are painting it as. It might even help make future phone calls shorter than a diaper change.
For the first part, while the IRS has yet to announce the exact breakdown of future staffing efforts, the money in the Inflation Reduction Act is not creating an “army of 87,000 agents.” Much of those funds will go toward filling existing positions as Baby Boomers in the agency retire, not creating new ones; a 2019 IRS report found that nearly one-third of its workforce is expected to retire by 2024.
And some increase in staffing is justified; the number of IRS employees has fallen by one-third since 1992, even as the country’s population grew by over one-quarter.
But not all of the money is going to auditors. Some of the funds will go to improving IT infrastructure and improving customer service responsiveness. A Treasury Department spokesman said last year that most of the net new hires would be allocated to customer service specifically.
Lastly, the Biden administration has bent over backward to try to sell the new enforcement as only focused on high earners. Treasury Secretary Janet Yellen directed the IRS commissioner to ensure the new funding focuses on “high-end noncompliance” (translation: tax evasion by the wealthy), and does not increase the rates of audits on households or small businesses making less than $400,000 relative to what they’ve been historically.
That doesn’t mean no households making less than $400,000 will get swept up in additional audits; a Congressional Budget Office report found that non-audit activities, such as greater automated screening and document matching, could increase the tax compliance burden facing families under that threshold. But for the most part, the additional activity will focus on those comfortably making above that $400,000 figure.
Now, Democrats flubbed a golden opportunity to ensure middle-class families didn’t get swept up in higher audit rates. An amendment to last year’s bill, proposed by Republican Sen. Mike Crapo of Idaho, would have codified the idea that households making less than $400,000 should be protected from additional audits spurred by the extra funds, rather than relying on a directive from the Treasury secretary that could conceivably be reversed. That limit was voted down along party lines.
But while Republicans would never admit it publicly, additional IRS funding could help the agency run more smoothly and fairly. Right now, 53% of individual audits are on taxpayers making less than $50,000 a year, and according to a Syracuse University report, low-income taxpayers get audited at rates five or six times those of the higher earners.
The reason is simple – the IRS’ job is to find non-compliance, and “to expend the least amount of resources to conduct the largest number of examinations,” in the words of the National Taxpayer Advocate’s annual report to Congress. This means that low-income taxpayers, who are more likely to be eligible for refundable tax credits and other provisions which can lead to errors, are very likely to be flagged. High-income taxpayers, on the other hand, are more likely to have expert accountants and lawyers on speed dial, making it less cost-effective for the IRS to follow through on possible errors, inadvertent or intentional.
This imbalance could be remedied by reducing the rates of audits for low-income people, or by increasing the audits faced by high earners. There are strong reasons to prefer the latter.
A tax system in which no one but an unlucky few face the risk of sanction runs the risk of breeding a culture of non-compliance and a sense that the rules are only there for suckers to follow. A fully-staffed IRS, on the other hand, could ensure that taxpayers are treated equally regardless of net worth, and have more customer service representatives there to answer questions when they inevitably arise.
A Republican Party friendly to the working-class shouldn’t reflexively oppose more frequent audits of high-income individuals on limited government grounds, and it should recognize that making the IRS a little more user-friendly might improve, rather than negatively impact, those who are forced to interact with it.
Taxes are a necessary part of life, just like changing dirty diapers. And taking the easy political route of attacking the people who collect the taxes is an understandable move. But with the big symbolic gesture out of the way, the GOP should quietly let the exaggeration about the 87,000 new IRS agents die and move on to fleshing out an agenda that would, as McCarthy suggested, actively work for the American people.
Patrick T. Brown is a fellow at the Ethics and Public Policy Center, where his work with the Life and Family Initiative focuses on developing a robust pro-family economic agenda and supporting families as the cornerstone of a healthy and flourishing society.