The IRS is anticipating a significant surge in tax revenues, expecting to collect up to $561 billion more in overdue and unpaid taxes from 2024 to 2034. This projection comes as a result of bolstered enforcement efforts fueled by funding from the Democrats’ Inflation Reduction Act (IRA).
The IRA, which was signed into law in August 2022, allocated substantial resources to the IRS, providing an $80 billion infusion of funds. This increased funding has enabled the IRS to ramp up its enforcement activities, targeting tax evasion among wealthy individuals and large corporations.
According to a recent analysis released by the Treasury Department and the IRS, the additional funding from the IRA is expected to yield significant returns, with estimated revenues potentially reaching $851 billion from 2024 to 2034. This marks a substantial increase from previous projections, highlighting the effectiveness of the enhanced enforcement measures.
The report underscores the Biden administration’s economic agenda, emphasizing the importance of investing in rebuilding the IRS to ensure that the wealthy and big corporations pay their fair share of taxes. National Economic Adviser Lael Brainard praised President Biden’s commitment to reducing the deficit through increased tax compliance.
However, the IRS’s efforts to bolster enforcement have faced challenges, including threats to its funding. House Republicans implemented cuts to the IRS budget, diverting funds to other programs and initiatives. Despite these obstacles, the IRS has continued to roll out improvements in customer service and enforcement strategies.
Critics, including Republican lawmakers, have raised concerns about the potential impact of increased IRS funding on taxpayers, particularly those with lower incomes. Rep. Jason Smith, the Republican chairman of the House Ways and Means Committee, warned of the burdens that massive enforcement efforts could place on ordinary taxpayers.
Nevertheless, Treasury Secretary Janet Yellen has directed the IRS to prioritize audits on high-income individuals and corporations, ensuring that enforcement efforts are targeted effectively. The IRS aims to address the growing tax gap, which currently exceeds $600 billion annually, by cracking down on tax evasion and non-compliance.
In conclusion, the IRS’s efforts to enhance enforcement activities are expected to yield significant dividends in terms of increased tax revenues. With continued investment and strategic enforcement measures, the agency aims to narrow the tax gap and promote greater fairness in the tax system.