Capito, GOP senators blast Democratic plan to spend $80B to hire more IRS agents, saying it will hurt small businesses

MORGANTOWN – Sen. Shelley Moore Capito joined with other GOP senators at the U.S. Capitol on Tuesday to blast a Democratic proposal to increase Internal Revenue Service funding by $80 billion to beef up tax collection and enforcement.

The proposal is included in the Build Back Better legislation now before the Senate. More than half of the money would go toward hiring 87,000 new enforcement agents; it also includes $105 million to hire new regulation writers, they said.

President Biden and Democratic supporters say the $80 billion expenditure could produce $400 billion in collections of unpaid taxes to help pay for Build Back Better.

News reports indicate the IRS lost 33,378 employees from 2010 to 2020, including tax return auditors and tax collectors.

Sen. Mike Crapo, R-Idaho, led the press conference. While Republicans warded off the proposal to trigger an IRS alert for every $600 transaction in someone’s checking account, he said, this proposal will still be invasive and harmful.

Congress’ Joint Committee on Taxation, he said, reports that while Biden has promised no new taxes for those earning less than $400,000, this proposal chiefly targets the middle class. The committee reports that 78% to 90% of the collections will come from those earning less than $200,000, while only 4% to 9% will come from the $400,000-and-up bracket.

“The IRS cannot generate the money that the Democrats are claiming they need for this bill unless it focuses the target right on the middle class,” he said. “This super-sized IRS will create an army of auditors to come out and go after the tax gap which lies primarily in the income categories under $400,000.”

Capito said West Virginia has 113,000 small businesses and acknowledged the IRS has many needs, including an outdated computer system created in 1962. “So they do need improvements, but they do not need $80 billion worth of agents knocking on everybody’s door.”

Sen. John Boozman, R-Ark., said the bill still includes a $10,000 threshold for checking account activity to trigger an IRS alert, and that the average American family’s activity is about $61,000. “So that’s virtually everybody.”

That activity he said, will trigger a threatening letter from the IRS, which will lead people to try to call to learn more. But the IRS answers only 40% of its calls and many of those result in long waits; the IRS even has a courtesy disconnect after 45 minutes. So there are a lots of things Congress can do for the IRS to make customer service more effective, but this isn’t the right move.

Capito and Crapo were among those who criticized Build Back Better in general. Crapo cited the just-released Congressional Budget Office score of the $1.75 trillion bill, which puts the true cost at $4.9 trillion. The Senate was set to vote Tuesday on raising the debt ceiling by $2.5 trillion and Build Back Better would require another hike of $3 trillion.

“That should be game over,” he said. “This bill needs to be stopped and the gimmicks need to be exposed.”

Sen. Chuck Grassley, R-Iowa, said he served on the 1998 IRS restructuring commission, created because small businesses were being harassed by the agency.

The big corporations the proposal allegedly aims at, he said, can afford to defend themselves. But small businesses find it easier to pay than to hire lawyers to defend them. In 2021, small business audits already were up 50%. “They’re on an agenda that’s going to hurt small business.”

Sen. John Cornyn, R-Texas, asked, “Why would you trust someone who says a $3 trillion spending bill will cost zero?” Similarly, it would be hard to trust that the “army of agents” will just collect taxes owed and not target or harass taxpayers and small businesses.

He said if the proposal comes to the floor, he will probably to introduce an amendment on the floor to prohibit the IRS from going after anyone earning less $400,000.

The Dominion Post contacted Sen. Joe Manchin for his thoughts on the proposal. He said in an email exchange, “I have long supported ensuring the IRS has the funds necessary to enforce our tax laws and make sure all Americans pay their fair share to support the needs of our nation. I will continue to work with my colleagues and President Biden as we negotiate in good faith on the Build Back Better Act.”