Paint Square reports…
President Joe Biden has recently proposed a new way to achieve funding for his multimillion-dollar plan intended to boost infrastructure, families and education.
According to reports, the plan involves having Congress build up the Internal Revenue Service so that the association can more aggressively collect unpaid taxes throughout the nation. The potential solution for government funding comes as Republicans refuse to raise taxes on corporations and Democrats refuse to raise taxes for people making less than $400,000 annually.
A little more detail…
By the end of the month, Biden released the “American Jobs Plan,” a $2.25 trillion spending proposal that aims to invest in the nation by creating millions of good jobs, rebuilding the country’s infrastructure, and positioning the United States to out-compete China. As intended, the plan includes traditional infrastructure projects like roads and bridges, but also focuses on tackling climate change, boosting human services and fighting racial injustice.
When the plan was released, Biden envisioned that it would be paid for by increasing the corporate tax rate to 28% from 21% and by changing the tax code to close loopholes that allow companies to move profits overseas. Although, the plan does not include expected increases in the top marginal tax rate or to the capital gains tax and instead, would spread the cost for projects over an eight-year period and aims to pay for it all over 15 years.
Turns out there is quite a bit of money for the IRS to uncover…
In an estimate by the White House, should the IRS receive more resources, the increased collection of taxes and audits of businesses, estates and the wealthy could raise $700 billion in over 10 years.
The IRS reports that those making annual incomes of $25,000 or less are audited at a rate of 0.69%, while those making incomes up to $500,000 are audited at 0.53%. In 2019, the audit rate for millionaires plunged from 8.4% in 2010 to 2.4%. Despite the numbers, the IRS denies the notion of unfair audit treatment.
Previously, the IRS has estimated that the tax gap is somewhere around $440 billion per year, however, in a recent Senate hearing IRS Commissioner Charles Rettig reported that that number was much higher: roughly $1 trillion annually. Rettig attributed this increase to the recent boom in income made by self-employed “gig” workers, in which income made by this type of work could be underreported, in addition to concealed offshore income and increased use of cryptocurrency.
But they need to invest in the IRS to make it happen…
While many seem to be in favor of the proposed collection of infrastructure funding and some speculating the plan, another issue looms for the IRS in particular. According to reports, funding for the IRS has been cut 20% since 2010. To mediate this issue and increase the push for tax collection, Biden has since outlined an extra $80 billion over 10 years to bolster IRS audits.
However, in appropriating the funding for the IRS to conduct these audits of upper-income individuals and corporations, the Penn Wharton Budget Model—a research organization associated with the University of Pennsylvania—predicts that only $480 billion would be brought in from 2022-31.
While the proposal is debated, other experts are claiming that if approved, the use of the IRS would be necessary to further narrow the tax gap.