The first bill introduced in a new session of Congress can be an important symbol of political priorities and values. For the Republicans who took over a slim majority in the House of Representatives, then, the main priority is eliminating an $80 billion appropriation to the IRS that includes hiring 87,000 employees to crack down on tax evaders, a move that could raise $180 billion for U.S. coffers during the next 10 years.
The proposed measure – nicknamed the “Family and Small Business Taxpayer Protection Act” – passed the House on Jan. 9 on a party-line vote of 221 to 210.
That soon was followed on the same day by a bill to abolish the IRS and replace federal taxes with a 30% national sales tax in a measure called the “FairTax Act of 2023.”
For help strategizing your investments and financial needs around such legislation, consider matching for free with a vetted financial advisor.
For Bob Lord, a tax lawyer for 35 years, the move was too much.
“We just saw House Republicans kick off the 118th Congress with a bill to reverse increases in the IRS budget aimed specifically at ramping up enforcement efforts against the top 1%, who are estimated to evade $163 billion per year in federal taxes,” Lord wrote in an opinion column posted at TheHill.com. “Of all the country’s many problems, they felt that the absolute most important thing worth their attention was helping wealthy tax dodgers escape detection.”
The long-standing animus of the GOP to the IRS ramped up in 2010 when the IRS was tasked with enforcing provisions of the Affordable Care Act, or Obamacare, and grew into outrage in 2013 when the IRS scrutinized the tax-exempt status of Tea Party-inspired conservative political groups trying to organize as 501(c)(3) non-politically focused charities. During his 2015 campaign for the Republican presidential nomination, Sen. Ted Cruz (R, Texas) proposed abolishing the agency altogether.
But Lord and others have cast Republican efforts to hobble the tax collecting agency as a strategy to protect the party’s political donors and to pursue the goal of limiting the federal government’s effectiveness.
“Republicans have this theory that the best government is either no government or very small government,” John Koskinen, commissioner of the IRS from 2013 to 2017 told The New York Times. “To the extent that you deny the government the ability to collect taxes that are owed, you limit the ability of the government to expand its operations.”
Lord, the tax attorney, also is a senior advisor on tax policy for the Patriotic Millionaires, a 13-year-old nonpartisan organization of high-net-worth individuals seeking to restructure the American tax system so that wealthy people pay a greater share of their income in taxes. He charges that the philosophy of limited government and supply-side economics (also called “trickle-down economics”) is simply a smokescreen to protect tax cheats.
“Republicans have actively undermined measures to help the IRS identify rich tax dodgers, measures to expand audits of rich tax dodgers and penalties to discourage tax dodging by the rich,” Lord wrote. “Coddling the rich in that manner has nothing to do with limited government or supply-side economics.”
IRS enforcement actions against wealthy taxpayers have continually decreased from 16% of Americans making more than $5 million a year in 2010 to about 2% in 2019. Meanwhile, the audit rate of lower-income taxpayers increased from 7.9% in 2020 to 12.7% in 2022, according to TRAC, a nonpartisan research center with the Newhouse School of Public Communications at Syracuse University.
Lord’s conclusion is stark. The introduction of new IRS budget cuts in the “Family and Small Business Taxpayer Protection Act” and the outright elimination of the tax agency in the “FairTax Act of 2023” reveal one obvious Republican goal: “Protecting the rich from taxation is the end, not the means.”
The Bottom Line
Republicans recently passed a series of bills focused on taxes. One eliminates the recent expenditure for hiring thousands of new IRS agents, while the another seeks to apply the IRS entirely. Some experts, though, think these bills only serve to help rich people and tax cheats.
- A financial planner can help you figure out any tax questions you have. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s income tax calculator to get a sense of what you may owe.
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