WEST PALM BEACH, Fla. — Treasury officials in the United States are urging Congress to release $20 billion earmarked for IRS enforcement, which is currently caught in legislative limbo and effectively frozen. These officials are concerned about impending funding cuts under the new Trump administration and are pushing for these funds to be included in upcoming budget discussions before President Joe Biden concludes his term.
This $20 billion allocation is distinct from another $20 billion that was rescinded from the IRS in the previous year. However, the measures intended to maintain government operations have unintentionally duplicated the previous cut, creating further complications for the agency’s funding. Treasury officials are sounding alarms about the potentially serious fallout if Congress fails to act, warning that this inaction could lead to an increase in the national deficit by approximately $140 billion, as outlined by Treasury Deputy Secretary Wally Adeyemo during a recent press conference. He indicated that such a loss would result in 6,000 fewer audits of affluent individuals and 2,000 fewer corporate audits, alongside a mandatory hiring freeze within the agency.
Adeyemo expressed serious concerns stating, “The IRS may have to make significant decisions regarding ceasing hiring and planning for a future where they lack the $20 billion in question, stalling a lot of their ongoing initiatives.” He added that without this funding, the IRS could deplete its enforcement resources as early as fiscal year 2025.
Joining Adeyemo was Maya MacGuineas, head of the Committee for a Responsible Federal Budget. She underscored the implications of IRS funding cuts, cautioning that such actions could adversely affect the federal deficit. The national debt currently stands at around $36 trillion, and the inflation surge following the COVID-19 pandemic has increased government borrowing costs, leading to a scenario where debt service is expected to surpass national security expenses in the coming year.
In light of these fiscal challenges, MacGuineas emphasized, “We strongly hope that there will not be any regression over the next months and years regarding the withdrawal, diversion, or repeal of revenues designated for the IRS to enhance tax collection efforts.”
Initially, the federal tax agency was allocated $80 billion through the Democratic Inflation Reduction Act, although those funds have since been withdrawn. Recent negotiations concerning the 2023 debt ceiling and budget cuts between Republicans and the Biden administration resulted in the rescindment of $1.4 billion from the IRS. Additionally, a separate agreement also mandates that $20 billion be extracted from the agency over the next two years and redirected to other non-defense expenditures.
This situation unfolds just as President-elect Donald Trump and the Republican-majority Congress are poised to make significant policy shifts. While Trump has frequently discussed his tax reform proposals, he has not focused extensively on the IRS’s role in tax administration or suggested direct cuts to its budget. Nonetheless, he has perpetuated an unfounded narrative regarding the IRS hiring 87,000 armed agents to target taxpayers.
On the other hand, Congressional Republicans have expressed intentions to reclaim the IRS modernization funding and have committed to cutting back on programs like the IRS Direct File initiative, signaling a contentious future for the agency amidst significant political changes.