Heads up Taxpayers due to a new analysis that the IRS and the Treasury Department did, the IRS plans to take in hundreds of billions of dollars more in overdue and unpaid taxes than previously anticipated.
Tax revenues are expected to rise by as much as $561 billion from 2024 to 2034, thanks to stepped-up enforcement made possible with money from the Democrats’ Inflation Reduction Act, which became law in August 2022.
The Congressional Budget Office in 2022 estimated that the tens of billions of new IRS funding provided by the IRA would increase revenues by $180.4 billion from 2022 to 2031. The IRS now says that if IRA funding is restored, renewed, and diversified, estimated revenues could reach as much as $851 billion from 2024 to 2034.
President Joe Biden’s Re-Election Campaign
Administration officials are using the report to promote President Joe Biden’s economic agenda as he campaigns for reelection — and as the IRS continually faces threats to its funding.
“This analysis demonstrates that President Biden’s investment in rebuilding the IRS will reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe,” National Economic Adviser Lael Brainard said in a statement. “Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit,” Brainard said.
What is the Inflation Reduction Act?
The Inflation Reduction Act gave the IRS an $80 billion infusion of funds. However, House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress last summer. A separate agreement took an additional $20 billion from the IRS over the next two years to divert to other non-defense programs.
The IRS has tried to show how it is spending the money it has left, in hopes of stemming the cuts. New customer service improvements rolled out as the tax season began Jan. 29, and earlier this month the IRS announced that it had recouped half a billion dollars in back taxes from rich tax cheats.
Rep. Jason Smith, the Republican chairman of the House Ways and Means Committee, said in a statement that the report “calls for even more IRS funding, uses pie-in-the-sky numbers, all without being straightforward about where the burdens of massive new enforcement efforts will fall.” He said increased funding will inevitably result in hundreds of thousands of additional audits for taxpayers making less than $75,000.
Making sure citizens pay their taxes is one of the tax collection agency’s biggest hurdles. This is understandable because people are often afraid of taxes. Even the audit rate of millionaires fell by more than 70% from 2010 to 2019 and the audit rate on large corporations fell by more than 50%, Treasury’s Deputy Assistant Secretary for Tax Analysis Greg Leiserson told reporters. So it’s not just the average person avoiding paying taxes. So many citizens just lack knowledge and are outright afraid of the thought of taxes.
The tax gap, which is the difference between taxes owed and taxes paid, has grown to more than $600 billion annually, according to the IRS.
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