April 14, 2023

Senator Warren Urges IRS and Treasury to Address Racial Inequities in Tax Enforcement

“You can and should study the racial equity implications of IRS budgeting, benefits, and enforcement priorities, and use that analysis to inform future decision-making”

Text of Letter (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) sent a letter to Internal Revenue Commissioner Daniel Werfel and Treasury Secretary Janet Yellen urging both to follow through on the commitments of the Biden Administration by examining and taking concrete steps to address racial inequities in tax benefits and enforcement.

In January of this year, researchers from Stanford University and the U.S. Treasury Department published a new working paper that revealed that, despite race-blind audit selection, the Internal Revenue Service (IRS) audits Black taxpayers at 2.9 to 4.7 times the rate of non-Black taxpayers. 

“Clearly, race-blind tax data has not led to race-blind tax enforcement outcomes,” wrote Senator Warren. “The IRS should collect racial data in a way that protects taxpayers and allows the IRS to guard against racial bias.”

This working paper is just the latest in a long line of research raising concerns about racial inequities in tax enforcement. In 2019, former IRS Economist Kim Bloomquist found regional bias in IRS audit case selection, resulting in disproportionately targeting poor Black communities in the South. Last year, an NYU Law Review article found that “the IRS being race-blind has not resulted in racially neutral outcomes, and instead has exacerbated racial disparities in tax administration.” Senator Warren questioned former IRS Commissioner Charles Rettig on these findings and was disappointed to have her concerns dismissed.

“The latest working paper should put to bed any question about the existence of a problem with racial inequities in audits,” wrote Senator Warren. “IRS and Treasury must conduct internal examinations of these racial disparities.” 

In the letter, Senator Warren also argues that these internal efforts would be in line with IRS funding and transformation goals, the Taxpayer Bill of Rights the IRS’s mission to enforce tax laws “with integrity and fairness to all.” In February 2023 at his confirmation hearing, IRS Commissioner Daniel Werfel committed to send a report to Congress within 60 days detailing why there is racial discrimination in auditing, and the actions the agency can take in order to correct it.

“This effort to examine and increase equity in enforcement should include audit selection, as well as other areas such as seizure of assets, length of time refunds are held, tax relief including the innocent spouse relief program, collection due process hearings, civil penalty assessments, criminal referrals, and tax court litigation outcomes,” concluded Senator Warren.

Senator Warren has led the call for the IRS to enforce the tax system fairly on all Americans: 

  • In March 2023, Senator Warren and Angus King (I-Maine) led a letter with 19 other senators to Internal Revenue Service (IRS) Commissioner Daniel Werfel and Treasury Secretary Janet Yellen, expressing strong support for Secretary Yellen’s directive for the IRS not raise audit rates for small businesses or households making under $400,000 annually and that new enforcement funds provided in the Inflation Reduction Act will focus on reducing tax avoidance by large corporations and the mega-rich.
  • In April 2022, Senator Warren and Representative Judy Chu (D-Calif.) sent a letter to Secretary of the Treasury Janet Yellen and Internal Revenue Service (IRS) Commissioner Charles Rettig expressing concerns about higher IRS tax audit rates for low-income Americans and Commissioner Rettig’s response in a recent House hearing to new findings about these high audit rates.
  • In April 2021, at a hearing of the Senate Finance Committee, Senator Warren highlighted the importance of addressing racial inequities in the tax code.