Biden Poised to Get Win on IRS Funding in Reconciliation Package

President Joe Biden is poised to see his goal of significantly increased IRS funding become a reality, with the funding boost forming a key portion of the reconciliation package brokered by Senate Majority Leader Charles Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.)

Unlike most of Biden’s proposals to raise revenue, IRS funding made the cut. The roughly $80 billion in additional funding for the agency included in the legislation announced Wednesday is consistent with the amount the administration first proposed last spring.

The funds, which are outside of the regular annual appropriations process, would be available to the agency until Sept. 30, 2031. The measure would provide $45.6 billion for enforcement, $25.3 billion for operations support, $3.2 billion for taxpayer services, and $4.8 billion for business systems modernization. The money is aimed at strengthening the IRS’s efforts to enforce tax laws against wealthy individuals and businesses. The agency has seen a decline in audit rates over the past decade as a result of budget cuts.

The amount for taxpayer services is higher than the $1.9 billion provided for in a broader economic package the House passed in November. The amount for enforcement is several hundred million dollars higher in the Senate measure, while the amount for operations support is nearly $2 billion lower.

Chad Hooper, executive director of the Professional Managers Association, which represents IRS managers, said the funding would allow the IRS to implement technologies allowing the agency to more deftly target high-income taxpayers who aren’t compliant with tax laws.

“Those taxpayers are very difficult to pin down in the system that we have now,” Hooper said.

IRS Commissioner Chuck Rettig has pressed Congress to provide the agency with multiyear funding, saying it’s challenging for the agency to update its technology when it is subject to a series of short-term spending bills. He has also said that the agency is “outgunned” on enforcement because of its limited resources.

The bill also includes hiring flexibility for the IRS, a nod to the agency’s recruiting challenges. It would allow the IRS to using an expedited hiring process, as well as higher rates of pay for a limited number of employees. The administration estimated last year that an $80 billion IRS funding increase could allow the agency to hire about 87,000 additional employees over a decade, doubling the size of its workforce.

The National Treasury Employees Union, which represents IRS employees, said the bill would help the agency catch tax cheats and bolster customer service.

“We are extremely encouraged that there is widespread understanding in Congress that improving enforcement and customer service by hiring more trained professionals and modernizing computer systems is a surefire way to reduce the deficit, fight inflation and make the IRS a more effective and efficient agency,” NTEU National President Tony Reardon said in a statement.

Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, spoke favorably about the portion of the IRS funding section focused on congressional oversight. The bill calls for the IRS to submit a plan for spending the funds within six months of the legislation’s enactment, and to provide Congress with quarterly updates after that.

“That gives the IRS an incentive to actually get something done,” she said.