Rep. Jason Smith (R-Mo.), who clinched the chairmanship of the Ways and Means Committee, walks into a meeting where Republican members vote on key committee chairs on Monday, January 9, 2023.
By EMILY COCHRANE and ALAN RAPPEPORT
House Republicans, in one of their first legislative moves, voted to cut funding for the Internal Revenue Service earlier this week, as conservative lawmakers try to kneecap President Joe Biden’s $80 billion overhaul of the beleaguered agency.
The measure does not have the votes to pass the Democratic-controlled Senate, let alone receive approval from Biden. It passed the House, 221-210 along party lines, with every Democrat in opposition and Republicans applauding upon passage.
But the legislation serves as an opening salvo from the new Republican majority, which is seeking to undercut the policy accomplishments of Democrats over the past two years, when they controlled both Congress and the White House.
The Biden administration issued a statement of policy on Monday confirming that the president would veto the measure and dismissing it as “a reckless bill.” Sen. Chuck Schumer, D-N.Y., the majority leader, said that “this is a giveaway to the multimillionaires and big corporations, and Democrats won’t let it happen.”
The Republican focus on the IRS comes after years of the complaints from the party that the agency had unfairly targeted conservative groups and harangued small businesses and middle-class families.
“The IRS does not need a raise — it needs a reckoning,” Rep. Jason Smith of Missouri, who clinched the chair of the powerful House Ways and Means Committee on Monday, said about the bill. In a separate statement, he added that Daniel Werfel, Biden’s nominee to serve as the next IRS commissioner, should “plan to spend a lot of time before our committee answering questions about the leaking of sensitive taxpayer information and an agency with a history of targeting conservative Americans.”
Shortly after winning his speaker position early Saturday, Kevin McCarthy of California reiterated his pledge to make defunding the IRS the first bill of the Republican majority.
“The government should be here to help you, not go after you,” he said.
Democrats included an extra $80 billion for the IRS in last year’s Inflation Reduction Act, which passed over Republican opposition, saying it would help the agency crack down on tax evaders and ensure that the government was collecting the taxes it was owed. The money will be used to hire 87,000 IRS employees and modernize the agency’s antiquated technology systems. That investment is expected to generate $180 billion in revenue over 10 years.
Yet despite denouncing the federal budget deficit and calling for more fiscal responsibility, Republicans have dismissed any revenue gain from beefing up the tax collector. Instead, they have falsely accused the administration of trying to create a “shadow army” to shake down small businesses with assault rifles.
On Monday, the nonpartisan Congressional Budget Office said that the Republican bill to rescind billions of dollars in IRS funding would actually increase the deficit by $114 billion through 2032.
“They don’t want a fairer tax administration — they think it’s bad for some of their supporters,” Rep. Richard E. Neal of Massachusetts, the top Democrat on the Ways and Means Committee, said in debate with Republicans on the House floor. “What they’re attempting to do tonight is bad for middle-class families. It’s bad for small businesses.”
Rep. Michelle Steel, R-Calif., acknowledged that “the agency needs reform and modernization,” but argued that the money did not prioritize those goals.
Rep. Adrian Smith of Nebraska, the Republican who led debate over the legislation, said the measure “stops autopilot funding for an out-of-control government agency that is perhaps most in need of reform.”
J.P. Freire, a spokesperson for Republicans on the Ways and Means Committee, said on Twitter that the revenue estimates would necessitate more audits on middle-class taxpayers. He argued that the agency often audited taxpayers who did not owe the government any additional money.
“And ramping up those audits is going to be painful,” Freire said.
The money is intended to invest in an agency that has become depleted over the years. The effects of years of neglect and Republican cuts on the IRS budget were highlighted by reports recently published by the Ways and Means Committee as it released former President Donald Trump’s taxes.
The Biden administration has promised to prioritize using the additional funding to improve customer service at the IRS so that it is easier for taxpayers to get answers to questions. It has also pledged that audit rates for taxpayers earning less than $400,000 a year will not go up.
“House Republicans’ legislation would allow wealthy and corporate tax evaders to continue avoiding taxes owed, increasing the burden on honest, hardworking families who pay their taxes with every paycheck,” said Ashley Schapitl, a Treasury Department spokesperson. “The IRS audits nearly 80% fewer millionaires than a decade ago, and this legislation would deny the agency much-needed resources to hire top talent to go after the $163 billion in taxes avoided by the top 1% annually.”
Mark W. Everson, who served as IRS commissioner from 2003 to 2007, said the legislation proposed by House Republicans was a sign of an intensifying political battle over the fate of the agency.
“This is a shot across the bow, and it’s a very important one,” Everson said. He added that Republicans and Democrats needed to take steps to depoliticize the IRS.
“We should have plenty of debates about tax policy, but we need a fairly and efficiently functioning IRS,” said Everson, who is now a vice chairman at the business consulting firm Alliantgroup.