Fulfilling their 2022 election pledge to take aim at President Biden’s economic agenda, House Republicans late Monday voted to strip roughly $71 billion from the Internal Revenue Service, targeting money Congress approved last year to help the agency find and pursue tax cheats.
Democrats provisioned nearly $80 billion for the IRS last year for a wide range of uses — boosting taxpayer services to quicken agency response times, for example, while upgrading its aging computer systems. The funds included more than $45 billion for enforcement, since party lawmakers hoped to empower the IRS to find and collect unpaid federal taxes, particularly from high-earning individuals and businesses.
But Republicans, who unanimously opposed the Inflation Reduction Act, seized on the spending starting last year. They quickly turned it into an election-year cudgel, accusing Democrats of trying to pry into innocent Americans’ finances. And GOP lawmakers repeatedly — and falsely — claimed that the IRS planned to hire more than 87,000 tax auditors with the money. The party appeared to take the figure from a 2021 Treasury Department report that projected the total hires across all of the agency’s operations over the next decade.
Touting the bill before the House vote, Rep. Adrian Smith (R-Neb.), its sponsor, said Republicans hoped to preserve a small portion of the money previously awarded to the IRS to improve its operations. But he added that the cuts, which congressional analysts have tallied at more than $71 billion, would aid Americans who are “struggling under the weight of recent inflation and supply chain shortages.”
“The last thing they need is more IRS agents knocking on doors to conduct audits,” Smith alleged.
Democrats, meanwhile, repeatedly pilloried Republicans for engaging in political hyperbole — and faulted the GOP for pursuing legislation that would add to the federal deficit despite the new majority’s fervent commitments to improve the country’s fiscal health. The criticisms came in the wake of a report Monday from the Congressional Budget Office, which found that clawing back IRS funds would curtail its ability to collect unpaid taxes, adding about $114 billion to the deficit over the next decade.
In a statement, Vice President Harris faulted the GOP for “rushing to undo that progress and allow too many millionaires, billionaires, and corporations to cheat the system.” Sen. Ron Wyden (D-Ore.), the leader of the Senate’s tax-focused Finance Committee, similarly described the bill as a “handout to wealthy tax cheats,” adding in his own statement, “Senate Democrats will not entertain it.”
The move illustrated the fiscal fights to come in Congress as newly emboldened House Republicans take aim at some of Biden’s signature accomplishments — and look to force the government to reduce its spending.
“Promises made,” declared McCarthy, gaveling the first vote on legislation under his leadership to the applause of GOP members.
In a sign of their commitment, party leaders already have called for massive spending cuts in exchange for their votes around critical deadlines, including raising the debt ceiling to avert a catastrophic default and funding the government to prevent a shutdown.
GOP lawmakers embedded some of those principals in the rules by which the House is set to be governed over the next two years. Finalized earlier Monday, the package restored a policy known as “cut-as-you-go,” which requires Congress to pay for new mandatory spending with offsetting cuts rather than tax increases.
If the House does ever seek to raise taxes, GOP lawmakers mandated that the chamber must attain a supermajority, or the support of three-fifths of all sitting members. And Republicans revived an old rule that allows them to reduce salaries or fire specific federal employees, or cut whole programs, through amendments offered during floor debate.
After adopting the rules, Republicans turned to their first legislative priority — trying to strip the IRS of funds that McCarthy, in his first address as speaker, claimed would allow the government to “go after you.” GOP lawmakers later described the vote as the beginning of a broader array of oversight to come under Rep. Jason T. Smith of Missouri, tapped by party leaders on Monday as the new chairman of the powerful, tax-focused House Ways and Means Committee
“Our first step is defunding the $80 billion pay increase Democrats gave the IRS to hire 87,000 new agents to target working families. But we are not stopping there,” Smith pledged in a statement, adding that he planned to force Daniel Werfel, the president’s newly nominated IRS commissioner, to “spend a lot of time before our committee.”
On the House floor later, Smith said Republicans are “ready to provide oversight and accountability, and that starts today.”
The calls to claw back IRS funding stood in stark contrast with the GOP’s push to reduce government spending and tackle the country’s roughly $31 trillion debt. The agency’s prior leader, Commissioner Charles Rettig, previously told Congress the gap between taxes owed and paid could exceed $1 trillion annually, though official federal estimates are lower.
Many fiscal experts have predicted that new IRS spending would result in more government savings. In its analysis of the Inflation Reduction Act, the nonpartisan Congressional Budget Office found last year that the $80 billion included under the law would result in a net gain of $124 billion in revenue over the next decade.
In trying to repeal the funds, Republicans also threatened to imperil other operations at the IRS, an agency that has struggled in recent years as a result of poor staffing, outdated technology and dwindling funds — in part due to cuts previously imposed by GOP lawmakers.
At one point last year, the IRS had a backlog of more than 21 million paper tax returns, delaying many Americans from receiving their refunds on time, according to its top watchdog. The agency also could barely answer most of the roughly 73 million phone calls it received during the 2022 filing season, with only 1 of every 10 of those calls actually reaching an IRS employee, a federal oversight report found.
“They don’t want a fairer tax administration,” said Rep. Richard E. Neal (D-Mass.), the top Democrat on the Ways and Means Committee, criticizing the cut as a “messaging bill.” He added the cuts would leave the IRS struggling to operate “the way Southwest Airlines did last week,” referring to massive disruptions — triggered in part by computer woes — that stranded passengers nationwide.
Labor groups say that they also expect the troubles at the IRS to worsen without more funding. Tony Reardon, the president of the National Treasury Employees Union, which represents IRS workers, said the tax agency already “stands to lose 52,000 current employees over the next five years to regular retirement and attrition.”
“The long-term funding for the IRS as provided by the Inflation Reduction Act of 2022 is — as we speak — rebuilding, modernizing and upgrading agency services for all taxpayers,” he added in a statement. “Derailing these major new reforms, a top priority for the new Republican majority in the House, is short-sighted and destructive.”
Eric Yoder contributed to this report.