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Biden wants to give the IRS more money to chase wealthy tax cheats. Will it work?

Biden wants to give the IRS more money to chase wealthy tax cheats. Will it work?


Biden wants to give the IRS more money to chase wealthy tax cheats. Will it work?

Biden’s Build Back Better bill passes House, goes to SenateThe Biden administration’s Build Back Better social spending bill started at $3.5 trillion. It’s now down to less than $2 trillion.Staff video, USA TODAYWASHINGTON – The Internal Revenue Service could be getting an infusion of billions of dollars to help it hunt down wealthy tax evaders after years of budget cuts that crippled its enforcement powers.President Joe Biden is looking to pump $80 billion into the tax collection agency as part of his ambitious package of social and climate change initiatives. The administration projects that improving the IRS’s ability to chase wealthy tax cheats could bring in as much as $400 billion over the next decade – revenue that Biden is counting on to help pay for his Build Back Better plan.But analysts say it’s far from certain that improving the IRS’s enforcement capabilities will generate that kind of revenue.“That’s a pretty bold estimate for how much they could raise,” said Alex Muresianu of the Tax Foundation, a Washington-based nonprofit that analyzes tax policy.“It’s not out of the realm of possibility,but it’s a pretty generous estimate.”More: Is ‘illegal conduct’ the reason for rising gas prices? Biden urges regulators to find out’A reasonable goal’The nonpartisan Congressional Budget Office is expected to release its own cost estimate for Biden’s Build Back Better agenda by the end of the week. The office’s director, Phillip Swagel, said Monday the IRS provision of the bill is expected to net around $120 billion – a substantial figure but far less than what the administration projects.Biden already faces a serious challenge in pushing the bill through the Senate, where Democrats hold a slim majority and moderate Democrats like Sen. Joe Manchin of West Virginia have raised concerns about the plan’s cost. An analysis that the IRS provision would generate less revenue than Biden is counting on could further complicate his efforts to pass one of his key domestic priorities.The White House and congressional Democrats already are pushing back on the idea that the influx of cash won’t generate the revenue they anticipate. They argue the Congressional Budget Office doesn’t have experience analyzing the amount of revenue that could be gained from cracking down on tax evaders.“If anything, our estimates lowball how much revenue can be brought in by cracking down on rich tax cheats,” White House spokesman Andrew Bates told reporters traveling Tuesday with Biden on Air Force One.John Koskinen, who served as IRS commissioner under both Presidents Barack Obama and Donald Trump, said it’s plausible that stepping up enforcement could bring in $400 billion over a decade.“The IRS collects about $3.5 trillion a year in taxes, so collecting $40 billion more a year, an increase of a little over 1%, certainly seems to be a reasonable goal,” Koskinen said. Koskinen estimated while he was commissioner – when the IRS had a higher audit rate than it does now – $8 billion to $10 billion a year went uncollected from audits the agency had identified but couldn’t pursue because of a lack of resources.“The audit rate is now down about 50% from the rate before the budget cuts started, which means that a significant number of returns are not being audited today that would have been 10 years ago,” Koskinen said.“As accountants and other tax preparers, who monitor closely where the IRS audits are focused each year, see the decline in audits, they respond accordingly, feeling more comfortable about pushing the envelope in areas that are becoming less likely to be audited,” he said.More: ‘We’re finally getting this done’: Biden signs landmark infrastructure package in major win for domestic agenda’A lot of uncertainty’Roughly half of the $80 billion that Biden is pledging to pump into the IRS over the next decade would be targeted specifically for the agency to ramp up its enforcement activities. Another $32 billion would be used for the development of information technology and other services that could enhance the agency’s enforcement prowess.Congressional Republicans, banking groups and others have slammed the proposal, arguing the additional resources could empower the IRS to unfairly go after average Americans. The Biden administration insists only those earning more than $400,000 a year would be pursued.How quickly the IRS could step up enforcement and how much revenue those collection efforts would generate also remains a subject of debate.“There’s just a lot of uncertainty about the estimates in part because there’s a limited amount of information available,” said Janet Holtzblatt of the Urban-Brookings Tax Policy Center, a nonpartisan think tank in Washington.To fortify its enforcement, the IRS would need to hire and train auditors, buy new computers and bring on new programmers to operate them and develop data analytics systems sophisticated enough to detect questionable practices.That typically can take years, although the IRS is looking to hire mid-career individuals as auditors and examiners, which could reduce the time and cost of training them, Holtzblatt said.While improved technology could make it easier for the IRS to identify tax evaders, large corporations and wealthy individuals would still have the financial resources to hire sophisticated advisers who could help them find ways to avoid complying with tax laws or even file legal challenges against the IRS that could take years to resolve, Holtzblatt said.Swagel said the Biden administration appears to be assuming that enforcement will act as a deterrent and that rich people and large corporations will be inclined to pay their taxes if they know the IRS is stepping up audits.But the research on that is mixed, Swagel said, suggesting that tougher enforcement might encourage some companies to take more aggressive steps to avoid paying taxes.’Understandable frustration’Increased enforcement also carries the risk that law-abiding taxpayers could be targeted by the IRS, Muresianu said.“You’re going to catch some people who are not paying their taxes, but you’re also going to catch people who aren’t actually doing anything wrong,” he said. “That just adds certain additional compliance costs for law-abiding people.”Koskinen, however, said that upgrading data analysis procedures, especially with better use of artificial intelligence, would allow the IRS to more efficiently choose which tax returns merit additional review.Better technology also would allow taxpayers with questions to get answers more quickly and offer more services online, as the IRS strives to become more tech-friendly like banks and other financial institutions, Koskinen said.That, too, could lead to improved tax collection, he said.“There’s obvious and understandable frustration when you have to call on the phone and 75% of the calls go unanswered,” Koskinen said. “That often drives taxpayers, or their preparers, in frustration to just go with what they think or hope is right, resulting in many cases in underpayment of the taxes owed.”Michael Collins covers the White House. Follow him on Twitter @mcollinsNEWS.More: ‘No slam-dunk solution’: What can Joe Biden do to tame soaring inflation?Income taxes: What loopholes corporations use to avoid paying taxesBiden wants to raise the corporate tax rate to fund his infrastructure bill. Here’s how some of America’s largest corporations avoid paying taxes.Just the FAQs, USA TODAY

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