House Democrats call for IRS funding to pursue wealthy tax evaders

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A group of 25 Democrats in the House wrote to congressional leaders asking them to provide $12.1 billion in funding for the Internal Revenue Service, including $5.2 billion for enforcement, with an eye toward cracking down on high-income tax cheats.

The letter, written by Rep. Judy Chu, D-California, a member of the House Ways and Means Oversight Subcommittee, and Bill Pascrell, D-N.J., who chairs the subcommittee, said that maintaining the funding amount, which has already been passed in the House but not yet in the Senate, would help the agency pursue wealthy tax scofflaws and safeguard tax dollars from fraud.

“The strength of IRS enforcement activities must be a priority for Congress, especially considering the additional measures Congress enacted under the CARES Act to lessen the financial burden of the COVID-19 pandemic,” they wrote in a letter last week.

They pointed to an article last year from the investigative news organization ProPublica showing that the IRS disproportionately pursues audits of poorer Americans, including Earned Income Tax Credit recipients, while overlooking tax fraud by the wealthy. IRS commissioner Charles Rettig strenuously denied those accusations during a subcommittee hearing this month.

The Congressional Budget Office has found that increasing the IRS’s budget to investigate high-income Americans would more than pay for itself, the lawmakers noted. Increasing the examinations and collections budget by $20 billion over a decade’s time would increase revenues by $61 billion, and if the budget is raised by $40 billion over 10 years it would increase revenues by $103 billion.

They pointed to $2.3 billion in tax fraud in fiscal year 2020 identified by the IRS’s Criminal Investigation division, an increase of $500 million, or nearly 28 percent, from FY 2019. “According to the recent FY 2020 report, much of the group’s work in recent months has focused on fraud connected to economic relief lawmakers passed this year in response to the coronavirus pandemic, including cases of fraudulent claims for economic impact payments, Paycheck Protection Program loans and refundable payroll tax credits,” they wrote.

They contend that IRS enforcement resources should not be targeted at lower-income taxpayers, whose earnings are usually simpler to track from W-2 and 1099 forms and compare against the 1040 forms they file, as opposed to the more complex returns of wealthier taxpayers.

“The IRS should not continue an enforcement program focused on low-income taxpayers, singling out Earned Income Tax Credit (EITC) recipients, just because it is cheaper and easier,” the lawmakers added. “We urge you to preserve the $5.2 billion level of funding from the House-passed FSGG appropriations bill in order to ensure IRS can effectively collect taxes, including those owed by the top 1 percent of taxpayers.”

An IRS office in New York

Timothy Fadek/Bloomberg

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