US Treasury disputes conclusion that new IRS funding would raise taxes on the middle class

By David Lawder

WASHINGTON (Reuters) – As a political messaging war rages over $80 billion in new Internal Revenue Service funding, a U.S. Treasury official rejects an informal estimate that the money could make Americans earning less than $400,000 pay up to $20 billion more in taxes over a decade.

Republicans have seized on the estimate from the Congressional Budget Office (CBO), claiming that Democratic President Joe Biden’s recently signed tax, drug and climate bill would break his promise not to raise taxes on middle-class Americans. half.

Republicans also say the funding will unleash an “army” of 87,000 new IRS agents in American households, despite Treasury plans to focus most IRS hiring on offsetting a wave of retirements and improving service. customer and information technology.

When the bill, formally known as the Inflation Reduction Act, was being debated in the Senate, Republican Senator Mike Crapo introduced an amendment to ban any use of funds to audit Americans with taxable income of less than $400,000.

In response to a request from Crapo, the CBO found that the proposed amendment would reduce revenue by $20 billion over a decade if enacted, his office said. A CBO spokesman confirmed the figure.

The amendment was defeated on a party line vote.

Asked about the middle-class tax claims, Natasha Sarin, a tax administration and policy adviser at the Treasury Department, told Reuters this week that the CBO estimate assumed a threshold of $400,000 in reported taxable income. before any audit, which would exclude the middle class.

Sarin said those earning $400,000 and above include much wealthier people who have hidden their income to reduce taxable income below $400,000, sometimes even to zero, the very people Treasury seeks to audit.

A significant portion of the $20 billion estimated by the CBO would be recovered from the wealthiest people who don’t report their income, he said.

“People are trying to make it look like they’re under $400,000 when it’s really way over it,” said Sarin, who as a University of Pennsylvania law professor conducted influential research files/working_papers/w26475/w26475.pdf on tax evasion surveillance with former Treasury Secretary Larry Summers.

The CBO has not issued a final cost estimate for the Inflation Reduction Act, which includes IRS funds along with massive new spending on clean energy and health care.

Sarin said the $80 billion in funding to improve enforcement, information technology and taxpayer services would actually prevent more middle-class taxpayers who rely on wage income from being audited. New, modern computer systems could better use data analysis and other tools to more accurately target the wealthiest Americans for audits, she said.

(Reporting by David Lawder; editing by Jonathan Oatis)

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