The White House is looking at trading away part of a historic boost in Internal Revenue Service funding it won last year as part of President Joe Biden’s Inflation Reduction Act in order to seal a deal to raise the debt limit and avoid an unprecedented government default.
The New York Times reported Thursday that the White House was offering to redirect $10 billion of the $80 billion boost in IRS funding to ease Republican-proposed cuts in the annual spending that goes to non-defense federal agencies and programs.
The emerging deal had yet to be finalized, and negotiators continued to haggle over details, the Times said.
With the Treasury Department saying the government could be unable to pay all of its bills in early June, possibly as soon as June 1, without a debt limit hike, it’s crunch time for House Republican and White House negotiators. They still face the logistical hurdles of writing a bill and getting through various parliamentary obstacles to beat June 1 even if they reach a deal soon.
Biden had touted the IRS boost, noting the nonpartisan Congressional Budget Office had said it would bring in about $203 billion over 10 years through enhanced tax enforcement efforts and could allow the agency to upgrade its threadbare customer service.
Republicans made rolling back the beefed-up IRS a priority when they passed their $4.8 trillion debt limit bill at the end of April, saying reversing it would save Americans from paying for tens of thousands of new IRS agents.
Tapping the IRS money could ease the effect of proposed spending cuts Republicans are demanding as the price to raise the debt ceiling. A central bone of contention between the two sides has been the GOP’s stance that next year’s day-to-day funding for agencies and programs be lower than this year’s and Democrats’ public position that only a freeze at current spending levels was possible.
Rolling back some of the IRS money could cause heartburn for some Democrats on the Hill whose votes would be needed for a final debt limit deal.
“That’s an unnecessary concession,” Rep. Richard Neal (D-Mass.) told reporters earlier Thursday when asked about the idea, adding it would hurt efforts to give the IRS a “more sophisticated approach” to tax collection.
“I don’t think we should concede it,” he said.
“I don’t think we should concede it.”
– Rep. Richard Neal (D-Mass.)
Similarly, Sen. Elizabeth Warren (D-Mass.) tweeted her distaste for the idea.
“Cutting funding for the IRS to track down the hidden cash of wealthy tax cheats — funding that will raise as much as $1 trillion. Terrible idea,” she said on Twitter.
The IRS money has already made a difference in the way the agency works. The inspector general for tax administration reported the IRS had reduced backlogs enough to be close to pre-pandemic timeliness goals. And despite getting almost 800,000 more toll-free calls for assistance, the IRS helpline average wait time dropped from 24 minutes to only five during the spring tax filing season.
The money has also been eyed as a funding source to implement a direct e-filing program for taxpayers that would allow them to bypass portals offered by commercial tax prep firms such as H&R Block and Intuit.
House members left Washington on Thursday to get home for the long Memorial Day weekend, with the caution they should be ready to return on a day’s notice once a debt deal is struck.
A weary-sounding House Speaker Kevin McCarthy (R-Calif.) said early Thursday evening that efforts continued to reach an agreement and he expected to work out of the Capitol into the weekend if necessary to reach one.