At Hearing, IRS Commissioner Rettig Agrees with Warren On The Need For Mandatory Funding At The IRS
Republicans have deliberately targeted the IRS with budget cuts, which depleted its ability to enforce tax laws, especially on the ultra-wealthy and giant corporations that have increasingly used creative tricks to game the system; She will introduce legislation providing mandatory funding for the IRS, so the agency has has a stream of funds that's steady, predictable, and sustained
Washington, DC - In a Senate Finance Committee hearing today, United States Senator Elizabeth Warren (D-Mass.) questioned Internal Revenue Service Commissioner Charles P. Rettig on decreased IRS enforcement of high-income taxpayers and big corporations, and whether mandatory funding for the IRS would improve the agency’s ability to enforce the law.
Republicans have targeted the IRS with budget cuts, which has depleted the IRS’ ability to enforce tax laws and forces the IRS to play catch-up with an enforcement staff that's 30 percent smaller than it was 10 years ago and a technology system built on computer programming that is nearly 60 years old.
In response to Senator Warren, Commissioner Rettig said that mandatory funding would “absolutely” strengthen the IRS's ability to go after wealthy tax cheats. The Commissioner told Senator Warren: “Mandatory, consistent, adequate multi-year funding allows us to plan appropriately.” The Commissioner also stated that the IRS has lost 17,000 enforcement personnel, and expressed concern about further attrition due to budget shortfalls, stating: “Every time we go into hiring, we have a concern whether we can actually feed those folks the next year.”
Senator Warren said she’s working on legislation to provide mandatory funding for the IRS, as well as requiring new third-party reporting.
Transcript: How U.S. International Tax Policy Impacts American Workers, Jobs, and Investments
U.S. Senate Committee on Finance
Thursday, March 25, 2021
Senator Warren: Thank you, Mr. Chairman. Our tax system is rigged in favor of wealthy individuals and giant corporations that use lawyers, accountants, and lobbyists to avoid paying their fair share in taxes.
One problem is the tax code that shields the wealthy and the wealth of ultra-millionaires, and I’ve proposed solutions like a wealth tax to be able to fix that. But the tax code is only part of the problem – right now, we’re not actually enforcing the laws on the books and catching people who fail to pay what they already owe, particularly the ultra-rich. The top one percent of Americans account for more than a third of all unpaid federal income taxes.
And this adds up. Over the next decade, IRS will fail to collect an estimated $7.5 trillion dollars in taxes owed. That’s money we’re leaving on the table under current law -- money that could be invested in child care, education, a whole bunch of other priorities.
So, let me ask you, Commissioner Rettig. One of the best tools the IRS has to ensure that people are paying their taxes is to audit them -- check their numbers, force them to pay up if they’re cheating. But since 2010, audit rates have fallen nearly 60 percent overall and they've fallen nearly 80 percent for taxpayers with more than $10 million dollars in income. Why has the audit rate fallen most sharply for the richest taxpayers?
Commissioner Rettig: In the last decade, our enforcement personnel-- we've lost 17,000 enforcement personnel. So we have 17,000 fewer people to do exactly what you're asking and the point is we actually have 6,500. That's our population that go after the high income taxpayers, the most egregious cases, and the corporate world. So, if you were to add 17,000 to 6,500, I think you would see a reversal in those numbers. We're very hopeful. We feel some momentum -- bipartisan momentum -- for our support if we manage our operations effectively. But also, we-- we-- you know, there's amounts that we can absorb, and we can probably absorb 5 to 7,000 per year. We're ramping up our human capital office. I think it's what people deserve.
Senator Warren: I appreciate that.
Commissioner Rettig: For us to be effective--
Senator Warren: Let’s not forget: Republicans deliberately targeted the IRS with budget cuts, which depleted its ability to enforce our tax laws.
So even as the wealthy and corporations engineer increasingly creative tricks to game the system, the IRS is forced to play catch up with an enforcement staff that's now 30 percent smaller than it was 10 years ago and a technology system that is built on computer programming that's nearly 60 years old.
It’s clear we need a bold investment in the IRS, which President Biden has called for in his infrastructure plan. And Chair Wyden has been a champion for more enforcement funding for years.
But the solution isn’t just more funding. It’s about more stable funding that’s targeted toward catching the biggest fish -- and that's protected from lobbyists that try to chip away at that funding.
Most of the IRS’ funding is discretionary -- meaning that Congress decides every year how much the agency should get. But this leaves the IRS budget unpredictable and vulnerable to cuts.
By contrast, mandatory funding would provide funding on an ongoing basis, ensuring that the IRS has a stream of funds that's steady, that's predictable, that's sustained. Congress has provided this kind of funding for important purposes like preventing fraud in Medicare and Medicaid.
So let me ask you, Commissioner Rettig. Would additional mandatory funding, on top of what the IRS gets through the annual appropriations process, would that kind of mandatory funding strengthen the IRS’ ability to go after wealthy tax cheats?
Commissioner Rettig: Absolutely. Mandatory, consistent, adequate multi-year funding allows us to plan appropriately. Every time we go into hiring, we have a concern whether we can actually feed those folks the next year.
Senator Warren: Well, I’m glad to hear that this would be helpful because I’m working on legislation to do exactly that. And since one of the biggest ways that the wealthy and the corporations hide their income and avoid paying taxes is by claiming they have much less income than they really do, this legislation would also require more third-party verification of the reported numbers -- the same way that wages and interest are already reported to the IRS for the rest of us.
Rebuilding the IRS is about making sure that we have a playing field that is level and making sure that we have a government that works for everyone. Thank you, Mr. Retting. And thank you, Mr. Chairman.
Chairman Wyden: Thank you, Senator Warren. I know we're going to be working closely together on these issues.
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