By H. Harrison Coleman IV
So much for “Sleepy Joe Biden.”In Biden’s first four months, the new president has proven to be a policy juggernaut. His proposed American Jobs Plan and American Families Plan, if enacted into laws, would reinvent the roles that the U.S. government plays in its citizens’ lives, expanding American welfare to a level unseen since President Lyndon B. Johnson’s Great Society programs.
For instance, the free universal childcare and free two years of community college present in his American Families Plan would extend the federal government’s role in the lives in American’s lives “from cradle to college,” as this Washington Post column explains. Already, the first third of his $6 trillion plans, the American Rescue Plan, has been enacted into law and has transformed American welfare.
But perhaps one of the most important features in Biden’s new series of ideas is one of the most under-noticed ones. Tucked away in the American Families Plan is $80 billion––a drop in the bucket compared to the total cost of $4 trillion for the American Jobs and Families Plans––set aside for the Internal Revenue Service (IRS). This money, set aside for the enforcement of pre-existing laws, might just be the most important part of either.
For all the grumbling targeted at the IRS during tax season, the agency is one of the most essential in the United States. Without the money collected by the IRS, the government wouldn’t be able to offer any services. That means no potholes filled, no Social Security checks sent out, no courts able to operate and no national defense. The IRS is the American lifeblood, so why have we been financially choking it?
In the time between 2010 and 2020, the budget of the IRS has fallen by 20%, it has eliminated over 33,000 jobs at the agency and has performed 42% less audits. This may be cause for libertarians to jump for joy, but for the rest, the decay of IRS funding is bad news, all because of one little ratio: For every dollar that the government invests in the IRS, they could get $6 back. For anyone worried about the national deficit or the cost of Biden’s American Plans, the answer is obvious: give the IRS its teeth back.
We live in a time of great fiscal inequality––an inequality that has been exacerbated by the shrinking of the IRS. In 2010, the IRS had an audit rate of 10% for taxpayers earning over $1 million per year. In 2016, it was just a hair above 2%. The situation for the poorest among us could not be more different. In 2019, half of IRS audits were not for the wealthy, but for people who qualified for the Earned Individual Income Credit, the most basic system of American welfare that helps the poorest.
So, why has the IRS shifted its attention to the poor as opposed to the rich? The weakened and chronically underfunded IRS doesn’t have the resources to go after the wealthy anymore. The millionaire and billionaire class can afford to out-lawyer the IRS, throwing up legal roadblocks one after another and draining the IRS of what little funding it has left. The poorest, on the other hand, have no such access to legal armies, leaving them at the mercy of the taxman.
With Biden’s upgrades to the IRS budget, the rich would become an ever-plentiful target for the IRS once again. Janet Yellen, the former head of the Federal Reserve and the current Secretary of the Treasury, has said that the reduced ability of the IRS to go after the wealthy will cost the United States and its people $7 trillion over the next decade. This is not an estimation for what a new tax on the rich would bring in but rather the gap between the amount of money the U.S. should be collecting under its current laws versus what the actual haul is. This number is conflicted, however; the Wall Street Journal estimates that the cost of the wealthy’s tax fraud and avoidance is closer to $4 trillion over a decade.
Whatever the case may be, there’s several trillion dollars that rightfully belongs to the American people that is being enjoyed by those who are wealthy enough to just have to pay their legal share. An $80 billion increase in the IRS budget would go a long way to reducing the national deficit, pay to replace crumbling infrastructure and assure millions of Americans that the system is, indeed, fair.