The IRS plans to increase audit rates of wealthy individuals and large corporations using funds from the Inflation Reduction Act. The audit rate for those earning over $10 million will rise from 11% to 16.5% by 2026, while audits of corporations with over $250 million in assets will triple.
Republicans believe this will penalize the middle class, but the IRS and Biden administration officials insist the increased audits and hiring of new agents will not target those earning under $400,000 annually.
“As I’ve said over and over again, there is no new wave of audits coming for middle- and low-income (taxpayers), coming for mom-and-pops. That is not in our plans in any way, shape or form,” IRS Commissioner Danny Werfel said.
They aim to close the tax gap by focusing enforcement on high-income taxpayers and businesses. The IRS expects the higher audit rates will raise around $200 billion in additional tax revenues over 10 years.
“How much of this is going to be just IRS tax collection? They want to double the size of the IRS. I understand the industry has been shrunk, gutted, in some people’s words. And do you expect increased audits on the middle class?” CNBC’s Brian Sullivan asked.
“Certainly not on the middle class. Remember, one of the lines in the sand, for all his flexibility,” White House Council of Economic Advisers member Jared Bernstein said. “President Biden has always maintained that no one under 400,000 will pay one penny more in taxes.”
“So, line in the sand there. Look, in terms of closing the tax gap, that’s what you’re talking about here, something like 80 billion for the IRS, this raises something like 200 billion over ten years and some people call that a conservative estimate.”
Also, on the issue of taxes, the Biden administration is highlighting its contrasting views with Republicans on tax policies, emphasizing the need for increased tax rates on corporations and wealthy individuals.
Lael Brainard, head of the White House National Economic Council, will discuss the significant tax dilemma facing the winner of the upcoming presidential election during her speech at the Brookings Institution on Friday.
The 2017 income tax cuts, implemented during former President Donald Trump’s tenure, are scheduled to expire soon. If all these tax cuts end, most American households will face higher payments to the IRS.
However, extending all the tax cuts would result in an additional $4.6 trillion added to the national debt over the next decade, as estimated by the Congressional Budget Office.
While Republican Trump argues that tax hikes would harm the U.S. economy, Democrat President Joe Biden aims to prolong tax cuts for the middle class while increasing taxes on highly profitable corporations and the wealthiest individuals.
“The expiration of Trump’s 2017 tax package next year will put tax fairness front and center,” Brainard says. “The president is honoring his ironclad commitment to not raise taxes on anyone making less than $400,000 and will cut taxes further for workers and families, paid for by asking corporations and those at the top to contribute more.”
