One of the big selling points for the radical increase in IRS spending in the Inflation Reduction Act is that the estimated $124 billion hike in revenue brought in by “increased enforcement” would derive from expanding the number of audits on billionaires and big corporations, but not on small businesses or the middle class.
“Contrary to the misinformation from opponents of this legislation,” Treasury Secretary Janet Yellen wrote in a letter to IRS Commissioner Charles Rettig Wednesday, “small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”
But a study conducted by the House Republicans found that, to the contrary, 60% of the increased audits will target taxpayers making $75,000 or less. Fox Business News reported that “The analysis, which is a conservative estimate based upon recent audit rates and tax filing data, shows that individuals with an annual income of $75,000 or less would be subject to 710,863 additional Internal Revenue Service (IRS) audits while those making more than $1 million would receive 52,295 more audits under the bill.”
Media “fact checkers” have faithfully echoed the White House line that Republicans who say there will be a lot more audits on non-wealthy taxpayers are liars. “The Treasury says it will hire experienced auditors and workers who will improve taxpayer services, and that audit rates for those earning less than $400,000 are not expected to rise in relation to historic norms,” wrote the Associated Press.
Related: Holy Crapo Amendment! Dems Reject Middle Class Protection from Doubled IRS
There’s a huge problem for Yellen and Biden: there is no language in the IRA that prevents the IRS from conducting more audits on the middle class and small businesses. All we have are politicians’ verbal assurances and biased media “fact checkers” telling us Republicans are full of it.
It is true that Yellen has freshly directed the IRS to not increase the audit rate of under-$400,000s. And it’s also true that there’s no structural enforcement mechanism preventing the agency from continuing to go after low-hanging fruit to meet revenue targets. Or, in the memorable words of PolitiFact, “There’s no guarantee that the agency will adhere to the new policy it has announced, but there’s no guarantee that it won’t.”
Indeed, simple common sense tells us there are going to be more audits of middle-class taxpayers and small businesses: That’s where the money is.
The administration is not going to get $124 billion in revenue only from the rich. They’re going to have to squeeze cash out of those making less than $400,000 by strict enforcement of IRS rules. Breaking IRS rules is exactly what an audit is meant to uncover. It won’t matter if a taxpayer has been taking the same deductions for years. If the auditor chooses to interpret the rule a certain way, the taxpayer is toast.
Besides, as I’ve pointed out before, you don’t get to be rich in America by paying taxes. And the rich don’t pay their lawyers and accountants to help the IRS collect the taxes it thinks it’s owed. It’s why tax increases never, ever, ever raise as much revenue as politicians claim they will.
And it’s why the White House is lying when it says it won’t increase the number of audits on the middle class.
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