House Republicans have stirred controversy by tying emergency aid for Israel to budget cuts affecting the Internal Revenue Service (IRS). This agency has long been a target of GOP criticism.
The recently passed aid bill, which is unlikely to gain approval in the Democratic-controlled Senate, proposes cutting $14 billion from the nation’s tax collector in exchange for assisting Israel. President Joe Biden has already expressed his intention to veto the bill if it reaches his desk.
Critics argue that this IRS cutback would not save money but rather cost taxpayers billions of dollars, according to independent budget analysts. A Congressional Budget Office analysis released this week reveals that the move could decrease revenues by $26.8 billion over the 2024 to 2033 period, resulting in a net increase in the deficit of $12.5 billion.
The crux of the issue lies in the fact that this cut would divert funds away from auditing the wealthy, a practice that typically brings in more money than it costs. These audits target tax evasion among the wealthiest individuals, including millionaires, billionaires, large corporations, and complex partnerships.
IRS Commissioner Danny Werfel explains, “When you reduce those audits, you reduce the amount of money that we can collect and return to the Treasury for other priorities.”
The IRS was initially set to receive an $80 billion funding boost under the Inflation Reduction Act approved in 2022. However, these funds have been subject to cutbacks, and in June, legislation raising the statutory debt limit rescinded $1.4 billion allocated to the IRS through the IRA. The debt agreement also included a separate provision diverting $20 billion from the IRS to other non-defense programs, according to the White House.
Werfel points out that the initial loss of $14 billion from the recent bill could translate to an overall $90 billion reduction in revenue over the next decade based on an IRS model that calculates a 6-to-1 ratio of money spent to revenue collected.
Maya MacGuineas, president of the private Committee for a Responsible Federal Budget, criticizes the plan, saying that paying for Israel’s aid by cutting tax enforcement funds “is worse than not paying for it at all,” as it further exacerbates the need for new borrowing.
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