August 13, 2022 - 9:01 pm
The IRS has a backlog of 10 million unprocessed tax returns for the 2021 wage year. That means many Americans who filed their taxes on time four months ago — or longer — have yet to receive refunds for overpaying the federal government. This has caused a very real burden for taxpayers on tight budgets.
“The IRS does not hesitate to penalize and fine taxpayers for late filings and payments,” Sen. Ron Johnson, R-Wis., wrote to the agency this month, “yet it does not hold itself accountable when it does not process taxpayers’ returns in a timely manner.”
At the same time, Democrats in Congress have a stale idea on how to reduce the federal deficit — and, unsurprisingly, it doesn’t involve fiscal restraint. Instead, they seek to ramp up spending on the IRS, sending the agency into “beast mode” to track down tax scofflaws. The comically misnamed Inflation Reduction Act includes $80 billion for the tax collectors, an “investment” that supporters maintain will yield a $200 billion return.
This is a massive increase in funding for the IRS, which currently has an annual budget of $12.6 billion, The Wall Street Journal reports. The $80 billion will be doled out over nine years and includes $45.6 billion for “enforcement,” including litigation, criminal investigations, investigative technology, digital asset monitoring and “a new fleet of tax-collector cars,” according to the Journal. The IRS, which now has 79,000 staffers, will add 87,000 employees over the next six years, a significant increase even with retirements and other staff losses.
Democrats insist none of this will trickle down to the middle class. Treasury Secretary Janet Yellen wrote in a letter to the IRS commissioner that “contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”
Yet, as Reason magazine’s Liz Wolfe pointed out, Senate Democrats rejected a GOP amendment to the legislation specifically declaring that the IRS must not use its new resources to go after taxpayers of more modest means. Indeed, the new law includes virtually no accountability provisions for what the agency does with its massive raise.
“Beefed-up IRS enforcement is frequently billed as a means of cracking down on fat-cat tax evaders and shoring up federal government coffers,” Ms. Wolfe notes, “when in reality it allows a privacy-infringing government agency to harass the working rich, finding very little additional revenue in the process. There’s no reason to think this time will be different.”
In addition, 2019 numbers from the Treasury Department show that, while the top 1 percent account for 28 percent ($163 billion) of the $600 billion “tax gap” — the difference between taxes owed and collected — the bottom 90 percent of wage earners account for 35.5 percent of the shortfall, or $213 billion. In other words, there’s plenty of money to be generated by siccing IRS agents on the middle class — and the agency knows it.
This should be especially concerning in a hospitality-centric region such as Southern Nevada, where tipped employees dominate. Democrats argue that those who pay their taxes have nothing to worry about. But that’s fiction. Standing up to an aggressive tax collector can be an expensive, stressful and intimidating process even for those who have done nothing wrong. Stories of abuse against innocent taxpayers are legion, particularly when it comes to amorphous laws on “structuring” or statutes involving civil forfeiture.
Democrats have just unleashed an army of tax collectors on the American public. In the meantime, the IRS is unable to ensure that taxpayers receive the refunds they are legally due in a reasonable time frame. Voters should pay close heed to the progressive priorities at work here.