IRS estimates of unpaid taxes are “unfounded,” says Rep. Kevin Brady

Chairman of the Paths and Resources House Kevin Brady

Joshua Roberts | Reuters

Rep. Kevin Brady said the IRS should not get any further enforcement funding because estimates of unpaid taxes were “unfounded”.

President Biden has proposed spending $ 80 billion in new technology and more accountants to increase tax revenues by $ 700 billion over 10 years. IRS Commissioner Charles Rettig testified before Congress in April that the “tax gap” – or the amount of taxes owed unpaid each year – could be up to $ 1 trillion due to cryptocurrency, offshoring and poor income reporting. IRS data from 2011 to 2013 estimated the tax gap at $ 441 billion per year.

In an interview on CNBC’s Squawk Box, Brady, the top Republican on the House Ways and Means Committee, said Republicans “want to close the tax gap”. But he said the president’s proposal and similar laws introduced in Congress to strengthen enforcement by the IRS were flawed.

“This proposal is based on an unsubstantiated question, ‘What is the tax gap?’ “he said.” The IRS will admit its data is seven years old. They advise on cryptocurrencies and overseas transactions. What they say is give us a ton of money, let’s hire a bunch of accountants and we believe that that will generate revenue. But we’ve already seen that one of the problems is that it won’t make that revenue. “

Instead, Brady proposed a “thorough analysis” of the tax gap and its causes. “Then let’s find the solutions to the problem together.”

Democrats in Congress argue that funding the IRS and collecting other taxes already owed are key to generating revenue and enforcing tax law. Due to a lack of funding, the number of IRS revenue offices has decreased by more than a third over the past decade, and audit rates for taxpayers who earn more than $ 1 million a year have halved between 2010 and 2018, according to the IRS.

Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, said one reason the IRS’s published data on the tax gap may be out of date is because Congress reduced IRS funding. “One thing the IRS could do with more resources is to release the more up-to-date data on the tax gap that Mr Brady wants,” he said.

He said that even if the tax gap is half the IRS estimates, which is unlikely given lower audit rates, “it means Congress shouldn’t give the IRS the resources it needs to make sure people get the.” Pay taxes you owe? ”

Some Republicans have argued in the past that the IRS should collect existing taxes before the Democrats discuss raising tax rates. During the Trump administration, Treasury Secretary Steven Mnuchin said “addressing the tax gap” was a top priority and urged more funds to improve the exams of the rich.

In response to the Biden Plan, many Republican leaders and low-tax advocates say the IRS is ineffective, too intrusive, and too political – as evidenced by tax data obtained from ProPublica on wealthy taxpayers. ProPublica began publishing a series of articles in June showing how billionaires like Jeff Bezos, George Soros and others pay lower tax rates due to loopholes in the tax system – and in some cases no tax in certain years. ProPublica says it is unaware of the anonymous source of the IRS tax information.

Brady said that even with more funds, the IRS had failed to prove it was capable of closing the tax gap.

“The truth is that the IRS has not had a good experience with smart auditing and smart recovery,” Brady said.

A provision in early versions of the bipartisan Infrastructure Act included funding to increase the IRS ‘collections by an estimated $ 100 billion over a 10 year period to aid in funding the infrastructure projects. The provision was removed from the bill due to opposition from Republican negotiators. It will now likely feed into the broader reconciliation law being promoted by the Democrats.

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