By Tom Ozimek
Billionaire tech mogul Elon Musk posted an ironic message on Twitter mocking Democrats’ efforts to give the Internal Revenue Service (IRS) an $80 billion cash injection amid swirling fears the money might be used to hire legions of tax auditors that would target middle-income Americans with audits.
“When the country that revolted over taxes hires 87,000 new IRS agents,” reads the message in Musk’s meme, which was placed above a photo of a laughing British Army officer from a movie.
“Fate 🖤 Irony,” reads Musk’s caption, with the message apparently rooted in the idea that boosting funding for tax authorities—part of which will be used for enforcement—runs afoul of principles that underpinned America’s founding, like freedom from government intrusion.
Despite repeated insistence by Biden administration officials that the Inflation Reduction Act’s funding boost for the IRS would not be used to increase audit rates among American households making under $400,000 per year, critics of the bill have warned that exactly that might happen.
Tax Crackdown on Middle America?
Republicans have speculated that the money would be used to hire tens of thousands of IRS agents while arguing that their enforcement efforts would target ordinary Americans.
“Democrats in Washington plan to hire an army of 87,000 IRS agents so they can audit more Americans like you. That’s more than the entire population of [President] Joe Biden’s hometown of Scranton,” House Minority Leader Rep. Kevin McCarthy (R-Calif.) said in an Aug. 11 statement, which comes as Democrats in the House get ready to give their final seal of approval to the big spending measure, with an estimated price tag of roughly $700 billion.
While the bill itself makes no mention of specific hiring targets, a Treasury Department report from May 2021 (pdf) estimated that an investment roughly the size of the one in the Inflation Reduction Act would enable the IRS to hire around 87,000 employees across a range of positions by 2031.
The 87,000 figure was also cited by Grover Norquist, president of the Americans for Tax Reform, in a recent interview on Fox News.
“They want to take $80 billion from taxpayers, $80 billion and hire 87,000 more bureaucrats in the IRS. They’re going after small businesses. The IRS itself says they’re going to dramatically increase how they go after independent contractors and small businesses, not General Motors, smaller businesses. That’s where they think they’re going to make their money,” he told the outlet.
No Targeting of Middle-Income Americans, Democrats Say
Treasury Secretary Janet Yellen insists Republican claims that tax auditors will target middle-income Americans are false and politically motivated.
She said in an Aug. 10 letter to IRS Commissioner Charles Rettig that the “much-needed” funding would be used to modernize outdated technological infrastructure, improve taxpayer service, and enforce tax laws against high-earners and big corporations that don’t pay what they owe in taxes.
Yellen vowed that audit rates wouldn’t increase for households making less than $400,000 per year.
“Specifically, I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” Yellen said.
“This means 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,” she added.
The IRS chief, too, has insisted that the tax agency would “absolutely not” be increasing audit scrutiny on small businesses or middle-income Americans, according to a letter to members of the Senate on Aug. 4 (pdf).
Democrats have argued that the funding is needed to crack down on wealthy tax dodgers.
The Congressional Budget Office estimates that the funding boost to the IRS is expected to bring in $203.7 billion in revenue from 2022 to 2031.