Biden wants an 18% increase in IRS funding to close the ‘tax gap’

President Biden is urging lawmakers to boost the IRS budget by 18% as part of his plan to crack down on wealthy tax scofflaws.

Mr. Biden’s budget released Monday has an additional $2.2 billion for the tax-collecting agency, including millions to “facilitate more effective oversight of high income and corporate tax returns.”

“Last year, we experienced a rapid recovery with historic job creation and economic growth,” said Treasury Secretary Janet Yellen. “This economic rebound allows us to look beyond the pandemic-induced crisis and provide a roadmap to address future challenges: creating a tax system that is fair to working families.”

Overall, Mr. Biden’s budget for the coming fiscal year provides more than $14 billion for IRS operations — up from about $11.8 billion in fiscal 2022.

The White House said some of the extra money will go to bolstering IRS operations with $798 million for customer service and $310 million to “accelerate the development of new digital tools” for communications between the agency and taxpayers.

A substantial portion of the new money will go to resources and staffing for IRS enforcement and tax compliance. Administration officials, in particular, hope to crack down on wealthy scofflaws in hopes of closing the tax gap, defined as the “difference between taxes owed and taxes paid.”

The White House estimates that closing the tax gap through stepped-up enforcement could generate between $700 billion and $1.3 trillion in revenue for the federal government.

Congressional Democrats applauded the spending.

“The IRS lacks the resources it needs to crack down on corporations cheating our tax code, which leads to a $1 trillion gap between what’s owed and paid,” said Rep. Katie Porter, California Democrat.

GOP lawmakers say that beefed IRS enforcement will wind up only hassling working and middle-class taxpayers. They argue that unlike the wealthy, average Americans cannot afford to pay the legal fees required to dispute an audit by the IRS.

“They want to finance their spending spree by effectively treating every ordinary American as if they were under IRS audit,” said Senate Minority Leader Mitch McConnell, Kentucky Republican. “I must have forgotten when the president campaigned on giving everybody their own audit.”