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86,852 NEW IRS EMPLOYEES. You've probably heard Republicans say the Inflation Reduction Act, the massive spending bill just passed by Senate Democrats, includes provisions to hire 87,000 new IRS agents. The number seems too big to believe. The IRS has just 93,654 employees, according to the Office of Personnel Management. Why would Congress, in one bill, increase the IRS workforce by something like 92%? It doesn't seem possible. It certainly doesn't seem wise. It's not wise, but it is possible. And that is what 50 Senate Democrats, along with tiebreaking Vice President Kamala Harris, did when they passed the Inflation Reduction Act, which gives roughly $80 billion to the IRS between now and 2031. (The name, "Inflation Reduction Act," was a ruse to convince gullible voters that Democrats are actually doing something about inflation. The bill itself is made up of expensive climate measures, plus prescription drug provisions, tax increases, and the initiative to increase IRS enforcement.) The Inflation Reduction Act is the slimmed-down version of the even more massive "Build Back Better" bill, which failed earlier this year due to the opposition of Sen. Joe Manchin (D-WV). We know a lot about the IRS provisions of the new bill because the same provisions were in Build Back Better, which the administration extensively promoted. That's where the 87,000 figure came from. In May 2021, the Treasury Department produced a 22-page analysis of Build Back Better, and in supporting tables, the document said the bill would add 86,852 FTEs, or full-time equivalent employees, to the IRS between now and the year 2031. Do a little rounding, and there's the 87,000. Subscribe today to the Washington Examiner magazine that will keep you up to date with what's going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue! It's fair to say that Democrats are always searching for ways to wring more cash out of taxpayers. The obvious way to do that is to raise taxes. But the largest number of tax collections is in the vast middle of the income scale. To raise taxes on the middle class is politically unpopular. So Democrats pledge to raise taxes on the "rich" and "rich corporations." The Inflation Reduction Act focuses on corporations, creating a minimum tax for companies with more than $1 billion in profits. As for individuals, the portion of the bill dealing with the IRS says, "Nothing in this section is intended to increase taxes on any taxpayer or small business with a taxable income below $400,000. Further, nothing in this section is intended to increase taxes on any taxpayer not in the top 1%." Read it closely, and it doesn't really mean anything. The other way Democrats have sought to raise more taxpayer dollars is by beefing up the IRS. The idea is that Americans are evading all sorts of taxes, creating a "tax gap" — according to the Treasury Department, "the difference between taxes owed to the government and actually paid." The Biden administration says tax cheats are primarily "high-income." "In order for the IRS to appropriately focus enforcement scrutiny on high-income taxpayers and the businesses they own — which research has shown is the primary source of the tax gap — its budget must be replenished," the Treasury Department says. The problem is what the problem always is: The big money is in the big middle class. Workers who make more than $400,000 — that includes people right at that number up to super-billionaires — are only about 1.8% of all taxpayers, even though they account for about 25% of the nation's income. The other 98.2%, making up about 75% of the nation's income, is a lot bigger. And indeed, that's where much of current IRS enforcement is focused. The same will likely be true of the new, muscled-up IRS. "The main targets will by necessity be the middle and upper-middle class because that's where the money is," the Wall Street Journal editorial board wrote recently. "The Joint Committee on Taxation, Congress's official tax scorekeeper, says that from 78% to 90% of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000." In any event, there will be a lot of increased enforcement. About $45 billion of the $80 billion for the IRS will go to investigating taxpayers. That means that not every one of the IRS's 86,852 new employees will be auditors and examiners, but a lot of that manpower will in fact go to audits and increased scrutiny of taxpayers. Many of the targeted taxpayers will have to hire accountants to represent them in dealings with the IRS. Why oppose such a move? After all, Democrats are assuring the public that the money will go to pursue "wealthy tax cheats," in the words of Sen. Ron Wyden (D-OR). "Wealthy tax cheats are ripping off the American people to the tune of billions and billions of dollars per year," Wyden said last year, in support of Build Back Better's IRS provisions. Who is not in favor of going after wealthy tax cheats? Well, for one thing, they're not all going to be wealthy, and they're not all going to be cheating. The tax system is complex. People make mistakes that are not cheating. Also, assume the IRS does, in fact, need more money for enforcement. How much is too much? It can be difficult for an organization to handle a huge windfall — it's just too much to deal with efficiently. And that is what, it appears, Democrats have done to the IRS. Last year, when the Build Back Better provisions were being debated, the New York Times interviewed John Koskinen, who headed the IRS under former Presidents Barack Obama and Donald Trump. "Koskinen ... said he thought the $80 billion being proposed by the Biden administration might be too much," the paper reported. "The suggestion was surprising coming from someone who lamented loudly that the agency was being starved when he was in charge. 'I'm not sure you'd be able to efficiently use that much money,' Mr. Koskinen said in an interview. 'That's a lot of money.' Mr. Koskinen said he thought an extra $25 billion over a decade would help bring the IRS budget back to where it was around 2010." But Democrats do not want to restore the IRS to where it was at some point in the past. They want a new, muscular, aggressive IRS to go after the "wealthy." And when they discover that there aren't enough of the "wealthy" to reach their goal, they might turn their sights on workers with incomes that do not qualify as "wealthy." One last thing. Handing out all that money to the IRS could well mean that more dollars come to the very Democratic lawmakers who passed the bill. Much of the Inflation Reduction Act is designed to boost labor unions, which in turn support Democratic politicians. That certainly applies to the IRS portion of the bill, which will provide a big boost to the National Treasury Employees Union. The NTEU represents about 70,000 IRS employees. That is out of the total of 93,654. So it is reasonable to assume that out of nearly 87,000 additional employees, a large percentage will join NTEU. They will pay dues and fund political contributions. According to an Americans for Tax Reform analysis, NTEU's political action committee donated $609,000 in the 2019-2020 campaign cycle, and 97% of that went to Democrats. Among the beneficiaries of the union's generosity were House Speaker Nancy Pelosi (D-CA), Sen. Dick Durbin (D-IL), progressive champion Rep. Pramila Jayapal (D-WA), and others. "The massive influx in union dues generated by the Biden IRS agents will likely lead to a corresponding increase in NTEU PAC spending on Democrat candidates," noted Americans for Tax Reform. Ignore the misdirection in the bill's title, the Inflation Reduction Act. The Democrats' work on the IRS alone will make far-reaching changes in the ways U.S. tax laws are enforced, with just as far-reaching potential for unintended consequences. For a deeper dive into many of the topics covered in the Daily Memo, please listen to my podcast, The Byron York Show — available on the Ricochet Audio Network and everywhere else podcasts can be found. You can use this link to subscribe.
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