Former acting Internal Revenue Service (IRS) Commissioner Daniel Werfel testifies before a Senate Finance Committee hearing on his nomination to be commissioner of the IRS, on Capitol Hill in Washington, U.S., February 15, 2023. REUTERS/Kevin Lamarque
WASHINGTON (Reuters) – Internal Revenue Service Commissioner Danny Werfel urged Congress on Wednesday to approve a $1.8 billion annual budget increase as Republicans criticized the agency’s spending plans for $80 billion in new long-term funding as too heavy on enforcement.
Werfel told a Senate Finance Committee hearing that the Biden administration’s $14.1 billion fiscal 2024 IRS budget request would allow for further improvements in taxpayer services after the agency improved its call center response times with 5,000 new employees funded by last year’s Inflation Reduction Act.
The $80 billion that legislation over a decade provides for investments to beef up compliance and enforcement and modernize antiquated computer systems comes on top of the annual operations budget, which is substantially lower in real terms from 2010.
“It’s not enough resources to fund a tax system in an economy that grows in size and complexity every year,” Werfel said of the fiscal 2023 IRS budget of $12.3 billion.
The IRS earlier this month released a spending plan that calls for total new hiring of nearly 20,000 new staff during the 2023 and 2024 fiscal years, including 7,239 associated with enforcement and 6,489 in customer service.
The Strategic Operating Plan calls for spending nearly 60% of the Inflation Reduction Act funds, or $79 billion on expanded enforcement, but only $4.3 billion for taxpayer services. It also includes $3.9 billion for administering clean energy tax credits.
The higher weight of enforcement funds drew criticism from Republicans, who repeated worries about increased scrutiny of small business owners, despite Werfel’s pledges not to increase audit rates on those earning less than $400,000.
Senator John Thune, a Republican from South Dakota, said he was “deeply concerned” that the “funds committed to promoting the administration’s radical energy agenda” were similar in size to the taxpayer services spending plan.
Some Republicans in the House of Representatives have targeted repeal of the $80 billion in IRS funding as a key spending cut demand for raising the $31.4 trillion federal debt limit this year.
While Democratic Party control of the Senate may effectively block that option, tax policy experts say that trimming back the annual appropriation for the IRS is an easier target as Congress debates spending plans for the 2024 fiscal year, which starts on Oct. 1.