This week, Treasury Secretary Janet Yellen wrote a letter outlining that the $80 billion in funding the Internal Revenue Service is set to receive for more resources would not be used to bolster the agency’s auditing of middle-income earners and small businesses.
Despite criticism from Republican lawmakers and independent analyses, Yellen sought to quench concerns that the IRS funding included in President Joe Biden’s Inflation Reduction Act will not target average Americans.
“Specifically,” Yellen writes, “I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.”
“This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited,” she added.
The Inflation Reduction Act, which is now being construed as a climate and healthcare bill, passed the Senate 51-50 with an $80 billion measure to overhaul the IRS. But despite the bill’s title, the Congressional Budget Office (CBO) concluded that it would have negligible to little effects on curbing inflation. According to the New York Post, the earmarks of the bill would allow the IRS to hire roughly 87,000 new agents, essentially doubling its size.
On Friday, the House passed the Inflation Reduction Act in a 220-207 vote.
Citing the Build Back Better Act, to which the Inflation Reduction Act serves as a proxy, the CBO wrote that the “estimate of the deficit reduction [for the Build Back Better Act] was lowered by $11.0 billion over the 2022-2031 period.” And throughout its 10-year enactment, it is noted to have a negligible effect on inflation.
Still, Biden and other Democrats have insisted that the new bolstering of the IRS will only target corporations and the wealthiest Americans.
In her letter, Yellen mentions that the IRS plan “will focus on high-end noncompliance.”
“The[ir], sustained, multiyear funding is so critical to the agency’s ability to make the investments needed to pursue a robust attack on the tax gap,” she added.
Charles Rettig, the IRS Commissioner and recipient of Yellen’s letter, maintained that the wave of newly hired agents would “absolutely not” target middle-income Americans.
But last week, the Post, after citing a report from the nonpartisan Joint Committee on Taxation, noted that the some $200 billion of expected revenue the Inflation Reduction Act is expected to generate, according to a projection, almost 90% of it would come from small businesses making less than $200,000 annually.
The bill now heads to Biden’s desk.