Bill Proposed to Triple US IRS Budget... Targeting Tax Evasion by the Wealthy

Senator Elizabeth Warren [Photo by EPA Yonhap News]

[Asia Economy Reporter Byunghee Park] U.S. Senator Elizabeth Warren, a Democrat who has emphasized taxing the wealthy, has introduced a bill to triple the budget of the Internal Revenue Service (IRS) to prevent tax evasion by the rich.

According to Bloomberg News on the 24th (local time), Senator Warren proposed a bill to increase the IRS budget for the next fiscal year to $315 billion. This is nearly three times the current fiscal year’s budget of $119 billion.

Senator Warren argued, "Increasing the budget will enhance the IRS’s ability to detect tax evasion by the wealthy and secure more stable tax revenues." She added that by increasing the budget, the IRS can apply tax regulations more strictly and improve tax-related services and information technology (IT) systems.

Warren also included a provision to make the IRS budget mandatory, preventing annual budget fluctuations by Congress. She emphasized, "The budget should be mandatorily allocated so that lobbyists cannot easily strip the IRS of its funding."

Since the inauguration of the Joe Biden administration, bills to strengthen the IRS’s capabilities have been continuously introduced. This is because President Biden advocates for a larger government. The Biden administration aims to solve social and economic problems through active fiscal spending. Since taking office, it has announced several trillion-dollar fiscal policies and is trying to increase tax revenues as one way to secure funding. Accordingly, it plans to increase IRS personnel to more strictly crack down on tax evasion.

President Biden included a plan to provide $80 billion to the IRS over ten years in his proposed "American Families Plan." Through this $80 billion support, the IRS workforce is planned to be doubled. The Treasury Department estimates that doubling the workforce could collect an additional $700 billion in taxes.

Senator Warren did not specify the economic effects of increasing the IRS budget in the bill. However, Bloomberg estimated in a separate research report that Warren’s so-called "IRS Revival Act" would increase tax revenues by $1.75 trillion over ten years. This is expected to secure more tax revenue than President Biden’s plan.

The bill also includes a provision requiring financial institutions to report the account flows of wealthy clients. Additionally, it mandates the IRS to report annually on the so-called "tax gap," which is the difference between taxes owed and taxes actually paid. Currently, the IRS only discloses the extent of underpaid taxes irregularly and with significant delay. According to the most recent data released, the tax gap for the 2011?2013 fiscal years was $381 billion.