In a report on Thursday, the nonpartisan CBO, which analyzes budgetary and economic issues to support the congressional budget process, forecast that parts of Biden’s proposal to increase funding for the IRS by $80 billion between 2022 and 2031 would increase revenues by approximately $200 billion over those 10 years. That’s almost 37% below the administration’s prediction of almost $316.2 billion. CBO’s prediction excluded revenue changes resulting from portions of the proposal that involve new information-reporting requirements and other changes to the tax code. The Department of the Treasury’s Office of Tax Analysis estimated that more information reporting could bring in an additional $460 billion over 10 years, IRS Commissioner Charles Rettig said in a letter to Sen. Elizabeth Warren that was released Thursday. Overall, the administration forecast that all its IRS initiatives would raise $700 billion in additional tax revenue over the next decade. Shoring up the IRS to bring in more revenue is a key part of Biden’s spending in his American Families Plan. Over the years, the IRS budget has been slashed, resulting in fewer audits of wealthy individuals and a ballooning tax gap totaling nearly $600 billion in 2019 that is expected to rise to about $7 trillion over the next decade if left unaddressed. Giving the IRS more resources to target wealthy tax cheats could reduce the burden on taxpayers who are compliant. CBO noted some uncertainties that could affect how much extra revenue the IRS can collect with more funding. “It depends on the IRS’s ability to hire experienced candidates, changes in voluntary compliance, and the interaction of enforcement funding with the IRS’s other capabilities,” the budget office said. In the end, though, CBO said that if the proposals were enacted, “tax compliance would be improved, and more households would meet their obligation under the law.” Have a question, comment, or story to share? You can reach Medora at medoralee@thebalance.com
