Politics & Policy

Elizabeth Warren Introduces IRS Bill to Crack Down on Tax Cheating

Sen. Elizabeth Warren (D-MA) listens during the Senate Health, Education, Labor, and Pensions Committee nomination hearing for Marty Walsh to be the next labor secretary, on Capitol Hill in Washington, D.C., February 4, 2021. (Mandel Ngan/Pool via Reuters)

Senator Elizabeth Warren (D., Mass.) introduced legislation Monday to boost the IRS’s budget to $31.5 billion to target high-income earners who are cheating on tax payments.

“For too long, the wealthiest Americans and big corporations have been able to use lawyers, accountants, and lobbyists to avoid paying their fair share — and budget cuts have hollowed out the IRS so it doesn’t have the resources to go after wealthy tax cheats,” Warren said in a written statement. “The IRS should have more — and more stable — resources to do its job, and my bill would do just that.”

Warren’s “Restoring the IRS” bill comes after President Biden recently proposed his own plan for more robust tax enforcement as a way to generate more revenue to finance his sweeping spending programs and infrastructure investments that will soon be debated in Congress. The Biden administration’s fiscal packages on the table include the American Jobs Plan, which would cost $2.25 trillion, and the American Families Plan, which would cost $1.8 trillion.

The IRS budget has been slashed, leading to lower staffing levels and audit rates. Warren’s legislation would allocate mandatory funding for the agency instead of discretionary funding that is variable depending on the annual appropriations process. It would also funnel $31.5 billion to the IRS in fiscal year 2022, up from the $11.9 billion the agency received from Congress the previous year.

The money is likely to be used for stricter taxpayer enforcement on wealthy individuals, in addition to taxpayer help services and IT-systems upgrades, as it includes tougher underpayment penalties for Americans with incomes above $2 million. One major goal is to shrink the unpaid “tax gap” largely attributable to the top 1 percent. Warren’s bill also would require financial institutions to ramp up third-party reporting on account activity to allow the IRS enhanced taxpayer accountability. The bill also aims to examine racial and income inequalities in the IRS’s operations.

Republicans in Congress have expressed concern that more aggressive IRS enforcement is unnecessary coercion that would violate taxpayer rights and privacy while doing little to address tax-law complexity that potentially is causing confusion and underpayment.

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