U.S. Treasury officials are urgently calling on Congress to unlock $20 billion in IRS enforcement money that is currently tied up in legislative language, preventing its use. This funding issue, separate from a previous $20 billion rescinded from the agency, has raised concerns about the potential consequences of inaction.
If the funds remain inaccessible, Treasury officials warn of dire outcomes, including a projected increase in the national deficit by $140 billion. This shortfall would result in 6,000 fewer audits of wealthy individuals, 2,000 fewer audits of large corporations, and necessitate a hiring freeze within the agency.
The Treasury Deputy Secretary emphasized the critical need for the $20 billion to sustain IRS enforcement efforts, highlighting the risk of running out of enforcement funds by fiscal year 2025 if the situation is not addressed promptly.
Experts have also cautioned against overall spending cuts to the IRS, citing potential negative impacts on the federal deficit. The federal debt currently stands at approximately $36 trillion, with rising inflation post-pandemic leading to increased government borrowing costs.
While the IRS initially received an $80 billion funding boost under the Democrats' Inflation Reduction Act, subsequent budget agreements have resulted in significant funding reductions for the agency. A 2023 deal between Republicans and the White House saw $1.4 billion rescinded from the IRS, with an additional $20 billion slated to be diverted to nondefense programs over the next two years.
As the political landscape shifts with the incoming administration, concerns persist about potential policy changes that could impact IRS funding and operations. While President-elect Donald Trump has outlined tax proposals, specific details regarding IRS budget cuts remain unclear. Claims of excessive IRS enforcement agents have been debunked, but discussions around modernization funding and program cuts continue among Congressional Republicans.
