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Representative Kevin Brady said the IRS should not receive more enforcement funds because the estimates of unpaid taxes are “baseless.”
President Joe Biden has proposed investing $ 80 billion in new technology and more auditors to increase tax revenue by $ 700 billion over 10 years. IRS Commissioner Charles Rettig told Congress in April that the “tax gap” – or the amount of unpaid taxes each year – could reach $ 1,000 billion due to the cryptocurrency, the offshoring and under-reporting of income. IRS data from 2011 to 2013 estimated the tax gap at $ 441 billion per year.
In an interview with CNBC’s “Squawk Box”, Brady, the top GOP member of the House Ways and Means Committee, said Republicans “want to close the tax gap.” But he said the president’s proposal and similar legislation introduced in Congress to strengthen IRS enforcement are flawed.
“This proposal is based on an unfounded question, namely ‘what is the tax gap?'” He said. “The IRS will admit their data is 7 years old. They guess cryptocurrencies and foreign transactions. What they’re saying is give us a ton of money, hire a bunch of auditors and we think it will create income. But we’ve already seen that one of the problems is that it is not going to create that income. “
Instead, Brady offered an “in depth analysis” of the tax gap and its causes. “So together, let’s orient the solutions to the problem.”
Democrats in Congress argue that funding the IRS and collecting more taxes already owed are key to generating revenue and enforcing the tax code. Due to a lack of funding, the number of IRS tax officers has declined by nearly a third over the past decade and audit rates for taxpayers who earn more than one million. dollars per year halved between 2010 and 2018, according to the IRS.
Howard Gleckman, senior researcher at the Urban-Brookings Tax Policy Center, said one of the reasons the IRS data released on the tax gap may be out of date is that Congress has cut funding to the IRS . “One thing the IRS could do with more funding is release the most recent data on the tax gap Mr. Brady wants,” he said.
Gleckman said that even though the tax gap is half the IRS estimate, which is unlikely given the lower audit rates, “Does that mean Congress shouldn’t give does the IRS have the resources it needs to make sure people pay the taxes they owe?
Some Republicans have argued in the past that the IRS should collect existing taxes before Democrats discuss raising tax rates. During the Trump administration, Treasury Secretary Steven Mnuchin said “fixing the tax gap” was one of his top priorities and he called for more funding to improve audits on the rich.
In response to the Biden plan, many Republican leaders and supporters of lower taxes claim the IRS is ineffective, too intrusive and too political – as evidenced, they say, by tax data on wealthy taxpayers obtained by ProPublica. ProPublica began publishing a series of articles in June showing how billionaires like Jeff Bezos, George Soros and others pay lower tax rates – and in some cases no taxes in some years – due to loopholes in the system. tax. ProPublica says it does not know the anonymous source of the IRS tax data.
Brady said that even with more funding, the IRS hasn’t proven it has the ability to close the tax gap.
“The truth is, the IRS doesn’t have a good track record when it comes to smart auditing and smart recovery,” Brady said.
A provision in early drafts of the bipartisan infrastructure bill included funding to increase IRS collections by about $ 100 billion over 10 years to help pay for infrastructure projects. The provision was removed from the bill due to opposition from Republican negotiators. It will now likely be part of the broader reconciliation bill proposed by the Democrats.
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