Democrats in the U.S. Senate passed the misleadingly-named Inflation Reduction Act–which will not reduce inflation.

Tucked into this bill is a hefty $80 billion over the next decade to turbocharge the Internal Revenue Service (IRS) by hiring about 87,000 new agents. If only that meant they would actually start answering our calls.

The increase in manpower and resources will be used to increase enforcement, operational improvements, customer service, and systems modernization. Collectively, these changes are projected to raise over $200 billion to fund the bill’s climate and healthcare spending.

Most troubling about this aspect of the Inflation Reduction Act is that it empowers the IRS to go after hardworking Americans, especially those with the least means.

What the bill does

The Inflation Reduction Act would give the IRS $80 billion, which is more than six times the current IRS budget of $12.6 billion.

These will be the outcomes according to the Ways and Means Committee:

  • There would be more than 1.2 million more individual audits per year.
  • Nearly half of these audits—over 583,000—would be on Americans making up to $75,000 a year.
  • This will lead to more than 800,000 more federal tax liens on taxpayer property such as homes and vehicles.

The Biden administration hides the truth 

As Americans learn about this army of new auditors, the Biden administration is trying to calm fears that they will be going after poor and middle-class families.

White House economic adviser Jared Bernstein appeared on a CNBC program hosted by Brian Sullivan to speak on the bill’s impact on taxpayers.

I want to be clear, is the president guaranteeing nobody making under $400,000 will be audited [by the new agents]?” asked Sullivan.

No, no, no. That’s not what I said. Nobody making under $400,000 will pay higher taxes under the Inflation Reduction Act,” Bernstein said.

If they are doubling the size of the IRS then who are they gonna go after?” asked Sullivan, while also mentioning small businesses.

Bernstein did not answer the question.

First, working-class and middle-class families will likely see tax increases, breaking Biden’s promise. The Joint Committee on Taxation projects that corporate tax changes in this bill will hit families earning less than $400,000 with tax increases.

Second, that Bernstein would not answer the question of who would be audited tells us that 87,000 new agents are not just going after Mark Zuckerberg, Elon Musk, or Jeff Bezos. 

The IRS already goes after the poorest

The left believes that they can recoup $200 billion from tax cheats, particularly the rich, but here’s what they’re not telling us: The majority of underreported income from individuals and small businesses comes from those making between $0 and $200,000.

This is a big deal. Those the IRS already goes after have the least means to pay for legal and financial representation to defend themselves. More agents on the case are likely to increase these audits.

Tax audits are very rare, to begin with. Just 4 out of every 1,000 returns filed (0.4%) gets audited. However, as the number of audits of higher-income households falls, the number of audits of low-income families remains high. Analysis from Syracuse University found the poorest families were audited at a rate five times higher than everyone else.

The IRS depends heavily on so-called “correspondence audits” or a letter from the IRS asking for documentation on a specific line item on a return.

Over half (54 percent) of all correspondence audits last year targeted taxpayers with incomes below $25,000 claiming an earned income tax credit, one of the largest welfare benefits. In 2018, 26 million households received an average credit of about $2,500. 

In comparison, taxpayers with incomes from $200,000 to $1,000,000 had only one-third the odds of an audit compared with these lowest income wage earners.

A tax audit is not just nerve-wracking but places a hardship on taxpayers who are least able to hire the tax professionals to navigate them through the audit.

One problem with auditing these taxpayers is that many are difficult to reach. Analysis of audited  EITC recipients finds that those with wage income under $10,000 per year, did not respond at all in 64% of the EITC audits. For those with income over $40,000 per year, that rate dipped to 35%.

Americans are right to be concerned about the expansions of the IRS and their likelihood to target poor and middle-class households.

Meanwhile, IRS customer service is woeful. The IRS answered only 11 percent of phone calls during the last tax season. This new revenue will do little or nothing to alleviate taxpayer frustrations.

Bottom Line

When the left claims they are going after the wealthy to recoup lost tax payments, they are likely to keep hammering the poorest in our society and then creeping their way up the income ladder.