Will the IRS Lose Its $80 Billion Appropriation?

In what is certainly the shortest bill regarding federal revenue that I’ve ever seen come out of the House of Representatives, the House voted to rescind much of the $80 billion funding granted to the Internal Revenue Service (IRS) by the Inflation Reduction Act of 2022. The bill, H.R. 9092, known as the Family and Small Business Taxpayer Protection Act (Taxpayer Protection Act), consists of just one sentence that provides that certain elements of the funding granted to the IRS by the Inflation Reduction Act “are rescinded.”

Please note that the Taxpayer Protection Act does not seek to rescind the entire $80 billion appropriation. The elements to be cut include $45.6 billion specifically intended for tax-law enforcement and $25.3 billion for the support of law-enforcement activities.

The Taxpayer Protection Act would leave in place the funding targeted at taxpayer services, including pre-filing assistance and education, filing and account services, taxpayer-advocacy services, and other related services. The level of funding pointed at those programs — $3.18 billion of the $80 billion was earmarked for taxpayer services and education — betrays the thinking of much of Washington’s elite. Barely 4 percent of the windfall the IRS is to receive will directly help taxpayers comply with the law, compared with 96 percent that is intended to be used for, one way or another, enforcement.

This is why I opposed the funding bill in the first place. I have argued for decades that the vast majority of the problems people have with IRS compliance are not driven by tax cheating; they are the results of ignorance that is itself the result of our having a tax code that consists of more than 4 million words that have been changed more than 6,000 times just since 2001.

This is also why I challenged the current nominee for IRS commissioner, Danny Werfel, to rebuild the IRS’s pre-filing education programs, along with its outreach functions to citizens and private-sector tax professionals. Of all the government agencies in the United States, only the IRS touches every citizen, regardless of his age or his social, economic, or cultural background. This is why outreach and education must be a major priority for the agency, and not just an afterthought.

The question now on everybody’s mind is: What’s next for the IRS in light of the Taxpayer Protection Act’s funding cut? Given the circumstances in Washington, I believe the act is merely symbolic. While it passed the Republican-controlled House, it will not pass the Senate, and thus, it will never find its way to the White House to be signed by President Biden.

The IRS will still get its money, and my challenge to the new commissioner remains the same: Will you meaningfully work to assist taxpayers in complying with a law that is “so voluminous that it cannot be read, and so incoherent that it cannot be understood,” or will you simply turn up the heat on those hapless taxpayers who find themselves unable to comply?

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