Keep The IRS Adequately Funded To Catch Rich Tax Cheats

June 26, 2024

Wealthy Tax Evaders Cheat Us Out of Hundreds of Billions of Dollars Every Year

Rich people and big corporations have been illegally evading hundreds of billions of dollars in federal taxes they owe every year because the Internal Revenue Service (IRS) has lacked the resources to audit the highest income tax filers, enforce our federal laws, and catch the tax evaders. Of the roughly $600 billion in owed taxes that taxpayers evade annually, the IRS estimated that in 2019 the top 1% of American earners evaded $163 billion or 28% of unpaid taxes.

Republicans Hobbled the IRS to Protect Donors Who Cheat on Their Taxes

Between 2010 and 2021, Congressional Republicans led an effort to cut the IRS budget by 20% in real terms, resulting in a 31% reduction in enforcement staff in general and a 40% cut in revenue agents specifically. Audits of corporations with over $1 billion of income have dropped by 87% to an historic low, and for the first time millionaires were recently audited at a lower rate than working families receiving the Earned Income Tax Credit (EITC).

President Biden & Congressional Democrats Restored Adequate IRS Funding

In 2022, President Biden and his fellow Democrats in Congress began to restore IRS funding with a special investment of $80 billion over 10 years. That investment is already paying off: in 2023-24, the IRS collected over half a billion dollars from deadbeat millionaires; opened cases on over 100,000 other millionaires who haven’t even filed taxes for seven years or more; and started the process of collecting almost $30 billion from Microsoft in back taxes, interest and penalties.  It is projected that by the time the new IRS funding runs out in 2034, it will have raised $560 billion  in recovered revenue from the very rich. 

Meanwhile, the IRS is answering taxpayer phone calls in three minutes instead of 30; has cleared a backlog of millions of unprocessed returns; and initiated a successful free, online filing system called Direct File. 

Republicans Keep Trying to Withhold from the IRS the Funding That’s Been So Successful

Even though the IRS is doing so much better at serving honest taxpayers and catching wealthy tax cheats, Republicans keep trying to take away the funding that makes this double success possible. As part of the government debt ceiling agreement in 2023, Republicans demanded and achieved a $20 billion cut in the agency’s special funding. Then as part of the agreement to fund the government early in 2024, they demanded and achieved an acceleration of that big cut.

Congress Should Fully Fund The IRS So It Can Keep Improving

Congress must invest in the IRS’s tools to hold wealthy households and corporations to account for paying what they owe in taxes by fully funding the agency’s regular budget, replenishing recent cuts, and making the augmented funding provided by the Inflation Reduction Act permanent. This funding is necessary for the IRS to effectively enforce tax law against rich cheaters, better serve honest taxpayers, and raise needed revenue for public services and debt reduction. Biden’s proposed extension of enhanced funding for the IRS would raise an additional $340 billion over the next decade.