The Middle Class Won’t Escape the New IRS Audit Wave

A CBO analysis belies a White House claim about new funding for federal tax collectors

WSJ editorial. 

"Democrats spent last week swearing that only high earners would be squeezed under their plan to beef up the Internal Revenue Service. It took only a few days for the Congressional Budget Office to put that narrative to rest. A quick analysis from the budget scorer confirms that the audit expansion will ensnare the middle class.

The CBO made the point in an Aug. 12 letter to Sen. Mike Crapo, who had sought to bind Democrats to their promise to limit audits to high earners. If the IRS expansion plan “is not about folks who make less than $400,000,” as White House press secretary Karine Jean-Pierre claimed, why not make that clear in the bill? Mr. Crapo proposed an amendment to ensure new audits would exclude taxpayers earning less than $400,000, but Democrats voted it down 51 to 50.

Mr. Crapo then asked the CBO to calculate the effect his amendment would have had. The agency found that increased scrutiny on filers earning less than $400,000 would account for $20 billion over 10 years, out of a total of about $204 billion that Democrats hope to collect through a bigger, badder IRS. In other words, the IRS expansion as it’s currently designed could collect billions in revenue from new middle-class audits.

The problem is that for every tax cheat the IRS identifies, several more compliant tax filers will be subjected to needless scrutiny. Many of the hundreds of thousands of people audited each year are chosen at random, and most taxpayers can’t afford a lawyer to go to Tax Court to contest IRS claims of tax liability. They write the check to end the relentless IRS pursuit, whether or not they think it’s fair.

Cracks had already emerged in the White House narrative before CBO weighed in. Treasury Secretary Janet Yellen, who oversees the IRS, wrote to the agency’s commissioner last week to clarify the funding plan.

The additional $80 billion, she wrote, “shall not be used to increase the share of small business or households below the $400,000 threshold that are audited.” [Emphasis added.] Contrary to the White House, Ms. Yellen promised only that new audits wouldn’t be directed disproportionately at the middle class. She didn’t dispute that thousands more middle and low earners will face scrutiny.

On Friday House Democrats passed the tax- and-spending bill that includes the supersize IRS on a party-line vote, and President Biden will sign it this week. Good luck to readers as the taxman cometh."