TaxWatch: Midterm elections: IRS should brace for ‘broad and deep’ scrutiny if Republicans win


Less than three months ago, a bill dedicating $80 billion for sweeping technological upgrades, staff additions and more enforcement at the Internal Revenue Service passed with no Republican votes, but a lot of fiery GOP criticism.

Republican lawmakers could wind up with a majority in the House of Representatives and Senate after the dust settles on midterm elections. Polls point to Republicans taking the House, but the Senate being a closer call.

If there is a changing of the guard in both Houses of Congress, where would that leave the IRS, which still has to explain how it’s using the windfall? With an extra skeptical audience on Capitol Hill that’s going to scrutinize the tax agency’s every move, according to ex-IRS officials and experts.

Republicans may not gain two-third majorities to repeal the $80 billion and then override a presidential veto, observers say. But with the Inflation Reduction Act’s funding due to be released over the next decade in addition to annual appropriations, there are other ways a Republican-controlled House of Representative and Senate could make their presence felt.

“‘On our very first bill, we’re going to repeal 87,000 IRS agents. Our job is to work for you, not go after you.’”

— Rep. Kevin McCarthy, the House minority leader, speaking in September

This hasn’t allayed GOP critics. “On our very first bill, we’re going to repeal 87,000 IRS agents. Our job is to work for you, not go after you,” Rep. Kevin McCarthy, the House minority leader said in September campaign event. (A press representative for McCarthy did not respond to a request for comment.)

The allocations of money within the $80 billion cannot be shifted around because those allocations are written into the law, Kautter said. For example, attempting to cut the $45.6 billion earmarked for enforcement and redirecting it to other areas like taxpayer service would require changes to the law, and Biden still has veto power, he added.

But there’s also a grey area on how money gets used. After all, the lines can get blurry on what counts as an expense for “enforcement” versus “taxpayer service,” said Charles Rossotti, a former IRS commissioner who led the agency from the end of the Clinton administration to the early part of George W. Bush’s presidency.

“Taxpayer service” does not just mean somebody answering a query on how to fill out a form, just as “enforcement” does not just merely mean an IRS audit, Rossotti said. Both areas require more staff and better technology, he added.

Suppose someone gets an erroneous IRS notice saying they owe money and need to pay ASAP or risk missing a payment deadline? “If you know you did pay and you can’t get through, that’s pretty bad,” Rossotti said.

Days after the midterms, Rettig, the IRS commissioner, ends his appointment. IRS deputy commissioner, Douglas O’Donnell, becomes the acting commissioner until the administration puts a candidate forward for Senate approval.

The appointment doesn’t have to get bogged in gridlock, Rossotti said. “If you get the right kind of commissioner who works hard to make the point [that] we are here not to decide which taxes somebody pays, we’re here to make it work better,”

Looking ahead, Rossotti hopes there’s good news.

Soon before he became commissioner in 1997, the IRS was under a white-hot glare. Agents testified before Congress in black hoods to protect themselves as they discussed taxpayer mistreatment within the agency.

What came next was the Restructuring and Reform Act of 1998, which focused on taxpayer protections, creating and strengthening watchdog agencies among other things. It was Rossotti’s job to put the bill into practice.

The bipartisan bill cobbled support from both sides of the political aisle. It found common ground on what the IRS should and should not be able to do. “My experience is that it is possible,” Rossott said. “At least, it was then.”

TaxWatch: 40% of households will pay no federal income tax this year. Why that’s good news.

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