The Congressional Budget Office (CBO) says it has concluded its analysis of a proposal by the White House to increase spending on IRS enforcement activity by $80 billion between 2022 and 2031.
According to a recent blog post from the CBO, this funding increase would yield revenues of about $200 billion over that 10-year period.
Spending would go up in each year within that period, although the greatest amount of growth would happen in the first few years. By 2031, the IRS budget will have grown to 90% larger than in the CBO’s baseline projections from last month, more than doubling the agency’s staff. Of the $80 billion, about $60 billion would go to enforcement and operational support, per the CBO’s announcement.
The Biden administration is also proposing that financial institutions (FIs) increase their reporting on account inflows and outflows. Some of the increased funding would support a new information reporting system used by FIs.
Earlier this week, IRS Commissioner Charles Rettig wrote to Sen. Elizabeth Warren (D-MA), saying that requiring banks to provide insight into their customers’ transactions could help his agency recover missed taxes.
The Biden administration’s American Families Plan would require banks to report on customers’ withdrawals and deposits, a measure aimed at closing the gap between taxes paid and what is legally owed.
Roughly 82-84% of Americans pay their taxes on time and in the correct amount.
According to Rettig, each 1% increase in tax compliance equals about $30 billion a year in federal annual revenues, which would net up to $540 billion at 100% compliance.
According to the CBO, a proposed increase in IRS enforcement would lead to higher audit rates than its own baseline budget projections. Audits for higher-income taxpayers fell in the years between 2010 and 2018, while the audit rate for lower-income Americans stayed stable.
Under the administration’s proposal, audit rates would return to where they were 10 years ago, rising for all taxpayers but affecting higher-income taxpayers the most.