Senate Republicans balk at bulking up IRS because they don't want to chase wealthy tax evaders
Joseph Zeballos-Roig
Senate Republicans are balking at bulking up IRS enforcement to finance infrastructure.
"I am very skeptical that there's a lot of easy money to be had from so-called tax enforcement,' one GOP senator said.
The IRS is already under GOP scrutiny following a leak of wealthy Americans' personal tax records.
There's one measure receiving fresh debate in bipartisan negotiations for a $1 trillion infrastructure plan: bulking up the IRS so it collects more money from wealthy tax evaders.
That's been pushed by moderate Democrats this week as a source of extra revenue that could finance infrastructure spending, but the idea looks like to collide into opposition from Republicans, who have long accused the tax agency of overstepping into the personal lives of Americans. The IRS is already under major GOP scrutiny following a recent ProPublica report that featured a leak of wealthy Americans' tax records.
They also don't believe that chasing wealthy tax evaders will actually generate a major amount of money.
"I am very skeptical that there's a lot of easy money to be had from so-called tax enforcement," Sen. Pat Toomey of Pennsylvania, ranking Republican on the Senate Banking Committee, told Insider. "We could spend a lot more money, we could have a lot of intrusive rules, and find we don't have very much difference in revenue."
IRS chief Charles Rettig told a Congressional panel in May the amount of taxes going uncollected every year could exceed $1 trillion. Several Republicans including Toomey told Insider they're skeptical the number is that high.
The Biden administration put forward $80 billion in extra IRS funding as part of its spending plans, to correct years of GOP-led budget cuts at the agency - and a related decline in the number of audits. The White House forecasts the funds could raise $700 billion in new revenue, though some experts have challenged their estimate.
The bipartisan group is leaning towards putting $40 billion into the IRS. That could generate $103 billion in total tax revenue, or $63 billion for fresh spending towards overhauling infrastructure, the CBO estimates.
"We think we have a nice balance with where we are, and there are colleagues on my side of the aisle who are nervous about the [$63 billion] net figure because they're concerned about intrusion," Sen. Rob Portman, a GOP negotiator, told reporters, per The Wall Street Journal.
Other Republicans suggested that closing the tax gap could be worthwhile, though they were still cautious on how much money it could produce.
"We don't want people to be harassed, but I think everybody should pay their taxes," Sen. Roger Wicker of Mississippi told Insider. "I don't think there's as much 'there' there as people think."
Other leading Republicans pushed back against the idea. Sen. Shelley Moore Capito of West Virginia disputed the administration's estimate as too rosy and said it could lead to "ramped-up reporting" and yield ineffective results.
"You have to get a better number," said Capito, who had been Republicans' lead negotiator on an infrastructure package before President Joe Biden cut off talks with her weeks ago, citing a failure to agree on how to fund a package.
Joseph Zeballos-Roig
Moderate Democrats are eyeing bulking up the IRS to finance infrastructure as bipartisan talks continue.
"I think there's lots of documentation on the tax gap issue," Mark Warner said in an interview.
Another Democratic senator said extra money for the IRS was "a good possibility" in the nascent blueprint.
A bipartisan gang of 21 lawmakers is in fluid negotiations over a $1 trillion infrastructure plan, with the crucial difference being how to pay for some of it. Some moderate Democrats in the group are leaning in a certain direction on revenue: strengthening the IRS' ability to pursue tax evaders.
A pair of the group's last financing ideas, indexing the gas tax to inflation and charging drivers of electric vehicles, was thrown out by the White House on Monday. Top officials called them a violation of President Joe Biden's pledge to shield households earning below 400,000 from new taxes.
As the working group scrambled for new sources of revenue to cover its plan, which is focused on core infrastructure like roads and bridges, the idea of beefing up the IRS has gained steam.
"I think there's lots of documentation on the tax gap issue," Warner said in an interview with Insider. "It's not linear, but the more you put into the IRS, the better enforcement - that number could go as high as $700 billion."
He went on: "I do think there's an awful lot of evidence that we've had not the most effective enforcement over the last few years, particularly under the last administration."
Sen. Rob Portman of Ohio, a Republican negotiator, said last week the deal would include around $40 billion for the IRS, which has undergone a decade of GOP-led funding cuts that have weakened the agency's ability to gather taxes from very wealthy Americans.
Sen. Angus King of Maine, another member of the group, told Insider beefing up the IRS is among "the clearest opportunities" for new infrastructure revenue. He's co-sponsored a bill to reinvigorate the IRS with $80 billion in new funding to pursue wealthy tax evaders - the same level that Biden put forward in May.
"That's found money," he said. "But the trick is what will CBO score. It's not a question of how much money we put in for enforcement, it's what the CBO scores."
Sen. John Hickenlooper of Colorado told Insider that extra money for the IRS was "a good possibility."
"There are lots of different ideas out there," he said about the negotiations. Other proposed measures for infrastructure financing include repurposed stimulus money, a step the Biden administration has signaled it doesn't support.
The nonpartisan Congressional Budget Office (CBO) said in a report last year that $40 billion in IRS funding would collect $103 billion in total tax dollars, or $63 billion in new federal revenue.
Other analysts are skeptical of the administration's projection that their tax proposals directed at wealthy Americans would draw $700 billion over a decade. The Penn Wharton Budget Model estimated the administration's tax plans would instead generate $480 billion in new revenue over ten years.
Warner told reporters he believed the group was close to unveiling their proposal this week.
"I think it is overall very settled," Warner said. "We want to get the details right."
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