April 19,2023

Crapo: Bloated IRS Budget Plan Lacks Key Details

“It would be extremely challenging to use this funding plan to hold the IRS, Treasury Department, or anyone else accountable for any missteps.”

Washington, D.C.--At a U.S. Senate Finance Committee hearing on the Internal Revenue Service’s (IRS) Fiscal Year (FY) 2024 budget and FY 2023 filing season, Ranking Member Mike Crapo (R-Idaho) highlighted concerns with the agency’s recently-released $80 billion funding plan, which lacks critical details, as well as concerns about how the IRS will uphold its pledge not to increase audits on taxpayers earning less than $400,000 per year, and proposals for the IRS to implement its own tax preparation program. 

On the $80 billion funding plan:

Secretary Yellen promised a plan that would allow the public and Congress to hold the IRS accountable for the project.

While dense, what has been delivered is noticeably light on many essential attributes of a “plan,” and it would be extremely challenging to use the document to hold the IRS, Treasury Department or anyone else accountable for any missteps.

A few things it almost entirely lacks include: quantitative targets to measure against; backup data to analyze; and various key operational details—including, for example, who at the IRS or Treasury Department is ultimately responsible for making decisions on any particular issue.

It does not give any detail on how the IRS will implement Secretary Yellen’s $400,000 pledge—and details really matter here.

What the document quietly admits is astonishing.  Despite contrary rhetoric, the Inflation Reduction Act (IRA) did not give the IRS enough funding to fully realize the plan’s vision--this, despite having given the agency a slug of funding more than six times its typical annual budget.

During questioning, Senator Crapo asked Commissioner Werfel about proposals that seek to have the IRS prepare tax returns for taxpayers and made clear that Congress, not the IRS, should have the authority to make that determination.  He also reiterated concerns with both Treasury Secretary Yellen’s and IRS Commissioner Werfel’s unenforceable edicts that they will not increase audits on taxpayers earning less than $400,000 per year.

On direct e-file proposals:

Some want the IRS to prepare tax returns for taxpayers, and several colleagues have introduced legislation that would authorize the IRS to do that.  The IRA gave the IRS $15 million to study such an outcome.  This idea is concerning, and not just because of the apparent biases in favor of doing so of those selected to conduct this study.

Having the IRS act as tax preparer, tax collector and tax enforcer raises significant conflicts of interest, would incur billions of dollars in development and would expose exponentially more taxpayer information to misuse or abuse.  The private sector of this country already prepares and files free tax returns for tens of millions of Americans, and millions more Americans are already eligible for that.

On the unenforceable pledge to not raise taxes on those earning less than $400,000 per year:

I was very interested in you again making the pledge that you will not increase audits on those making less than $400,000 per year, but I’m concerned that the strategic plan did nothing to flesh out the details.  We know even less about what the IRS believes will happen to actual audit numbers for taxpayers making less than $400,000 per year than we did before.  There’s some kind of historical rate that’s being referenced, and a pledge from Secretary Yellen and you, but we need details on exactly how this pledge will be honored moving forward.

Senator Crapo has introduced legislation that would codify the Treasury Secretary’s unenforceable pledge to not use IRA funding to increase audits on anyone making less than $400,000 per year.  The legislation would prevent the IRS from using its $80 billion infusion of taxpayer dollars to squeeze more revenue out of hardworking taxpayers.

Watch Senator Crapo's opening statement HERE and questions HERE.