Biden Looks To Beef Up America's Most Detested Federal Agency To Underwrite Infrastructure Bill

White House proposes $80 billion increase to IRS budget

The IRS building / Getty Images
October 28, 2021

With a wealth tax on the rich off the table, Democrats are relying on a far less popular funding mechanism to fund their infrastructure bill: beefed-up IRS enforcement.

According to a proposal released Thursday by the White House, increasing the funding for the IRS by $80 billion would net $400 billion in revenue. That $80 billion would boost the IRS's budget by over 70 percent over the next 10 years when compared with the last decade and lead to a hiring spree of agents.

After a plan to tax the assets of billionaires collapsed Thursday due to bipartisan opposition, Democrats are left scrambling to find ways to raise enough revenue to pay for President Joe Biden's budget reconciliation package. But the move to boost IRS funding, congressional Republicans say, will put ordinary Americans under the tax agency's microscope and subject them to needless audits.

"The truly wealthy don't get a paycheck, so when we start talking about who we're going after, the answer is everybody," Rep. Mike Kelly (R., Pa.)  told the Washington Free Beacon. "Every single American will be affected by this. Every single American. They're not looking for a few pennies."

To reach the $1.85 trillion in total cost, some of the biggest proposed tax hikes include a 15-percent global minimum tax, which the White House says will raise $350 billion. A 5-percent surtax on income above $10 million and an 8-percent surtax on income above $25 million, the White House says, will raise an additional $230 billion.

The White House's revenue estimation is dramatically larger than what the Congressional Budget Office concluded in September. According to the CBO report, $80 billion in new IRS funding would raise just $120 billion in net revenue over the next decade. At $400 billion, the White House's revenue estimation is substantially larger than the $316 billion the administration predicted before the release of the CBO report.

"This is an exercise on paper [by Democrats] to say they're going to close the tax gap," Rep. Drew Ferguson (R., Ga.) told the Free Beacon. "We don't know how they arrived at those numbers. They won't tell us how they arrived at those numbers. And we don't think that really adds up; as a matter of fact, we know they don't add up."

Following outrage from members of both parties, Democrats this week ditched a plan to compel financial institutions to submit annual reports on all American bank accounts that see $10,000 or more in inflows a year. That proposed rule was supposedly critical to the IRS's enforcement tools, although nixing it appears to have made no difference in the White House's revenue projections.

Should the CBO again find smaller revenue estimates, the White House and congressional Democrats would be forced to trim the $1.85 trillion spending plan or come up with other offsets. Among the variety of spending proposals in the bill are $555 billion in funding for climate-change initiatives, six years of funding for a universal pre-K program, and a one-year extension of the enhanced child tax credit.