Why Are Republican Donors So Afraid of the IRS?

In the latest display of contrived outrage, conservative political groups are waging a campaign to stop efforts to boost IRS funding, including pressuring Sen. Mitch McConnell to block a bipartisan infrastructure compromise that beefs up IRS funding.

Shoring up the IRS’s budget is a central component of both the bipartisan Senate infrastructure framework and President Biden’s American Families Plan. It’s a popular idea that’s hard to argue against given its return on investment: experts estimated that the $40 billion that the Senate gang has proposed in increased funding will bring in $140 billion in revenue.

Anti-tax supply-sider Stephen Moore recently presented a weak argument against IRS funding in The Hill, claiming there would be, “More tax snoops. More audits.” And he even added that voluntary compliance goes up when people “perceive the system is simple, fair and uniformly applied.” That may be true, but the reality is that our tax enforcement is not fair and uniformly applied — and that’s by design. Conservatives began waging a war against the IRS in the 1990s and, by 2010, they successfully ensured the agency’s budget endured continual erosion.

This has left the IRS operating with 60-year-old technology and fewer auditors than any time since World War II, severely limiting its ability to process tax returns on time and go after tax evaders. In fact, the Treasury Department estimates that the U.S. loses $600 billion annually due to the “tax gap” — taxes that Americans owe but never pay.

Adequately funding the IRS would give the agency newfound power to go after wealthy tax cheats by taking on the armies of expensive lawyers that the rich hire to avoid paying taxes. They could also more effectively take on corporations, which regularly take aggressive tax positions that they know are likely illegitimate, only to keep their questionable tax breaks because the IRS lacks the capacity to investigate them within the statute of limitations.

Moreover, closing the tax gap is an essential step in addressing the racial wealth gap. Failure to adequately audit wealthy tax cheats disproportionately benefits white people, who are more likely to be among the top-earning households due to structural inequities that historically excluded Black and brown households from wealth-building opportunities. Meanwhile, the top 10 percent accounts for an estimated 61 percent of the tax gap. This means that the Republicans’ ill-advised cuts to the IRS’s budget are yet another way that they have tilted the playing field in the direction of corporations and the wealthy, leaving hard-working Americans to pick up the tab.

To be clear, this is exactly the outcome Republicans prefer. They — and their wealthy donors — don’t want to pay their fair share in taxes, which is why they’re so scared that the IRS might finally have the resources to go after tax crooks. This also exemplifies a vicious but all-too-common cycle in Washington: the rich and powerful exert undue leverage on our politicians to score economically beneficial policies, which in turn allow them to continue influencing future legislation. President Biden and the bipartisan Senate group must hold firm against this outside pressure and reverse decades of Republican sabotage, ensuring that the IRS finally has the resources it needs to do its job.

Tax Takes from Citizens for Tax Justice here. CTJ is a partner in the movement for transformative change. Find out more at http://ctj.org