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OPINION:
Jonathan Chait from New York Magazine gently notified me last week that a fragment of data referenced in the August note I wrote for friends and family was incorrect. I wrongly attributed a claim about data to the Tax Foundation.
The data was, in fact, from a House Ways and Means Committee analysis of the Inflation Reduction Act, and it was actually worse than reported in the August note. According to the analysis, citizens reporting anywhere from no taxable income to $200,000 a year will experience the full force of the new IRS agents — a little less than a million more audits per year — compared with about 250,000 a year projected to be conducted on those making more than $200,000.
I apologize for the mistake and am grateful that Mr. Chait was kind enough to alert me to the mistake and not to assume that it was intentional (it most definitely was not).
Part of the problem is that the legislation was passed without any regular order (committee hearings and consideration, etc.), so questions remain about what, exactly, the legislation will do.
We know that the “Inflation Act” — as President Biden has correctly identified it — provides $45.6 billion over the next eight years for tax enforcement (a 69% increase over baseline). It also provides $25.3 billion over the next eight years for “operations support” (a 53% increase over baseline).
Perhaps most importantly, during consideration of the legislation, Treasury Secretary Janet Yellen promised that it would not result in more audits — compared with historic levels — of those making less than $400,000 annually. That’s where the problem arises.
The Ways and Means assessment of the added audits is derived from the IRS’s own data and assumes that the rate of audits will be consistent with the rate from 2010 to 2018. It is as good an answer as any.
The Department of Treasury itself seems a little confused. In its brand new report on the legislation (“Inflation Reduction Act: Assessment of the Internal Revenue Service Implementation Efforts,” dated Jan. 12, 2023), the department makes clear the limits of its understanding with this amazing admission: “As of December 2022, IRS officials have not yet finalized what constituted the $400,000 income level or what historic audit level will be used for its metrics.”
Well, now. If, after five months of thinking about it, the IRS and Treasury can’t (or won’t) say how they plan to fulfill what seemed to be Ms. Yellen’s pretty clear commitment not to increase audits on those making less than $400,000 a year, it seems reasonable to call into question the sturdiness of that commitment.
In an attempt to head off increased audits of middle-class taxpayers, confirm Ms. Yellen’s promise and provide the Department of Treasury with what appears to be elusive clarity, Sen. Michael Crapo, Idaho Republican, offered an amendment in floor consideration of the legislation that explicitly limited audits and enhanced enforcement to those taxpayers and companies making more than $400,000 annually.
It will come as no surprise to learn that the amendment failed; not a single Democrat voted for it.
That vote and the subsequent smoke screen about how much $400,000 is and what did Ms. Yellen mean when she said “historic levels” clearly expose what the extra cash and the 87,000 new agents are really about: Team Biden plans to squeeze everyone, irrespective of vague commitments made in the heat of the moment.
Once again, this entire exercise emphasizes the importance of regular order in Congress. When legislation is drafted in secret and passed in haste, it is invariably the American people — all of them — who wind up living with suboptimal results.
• Michael McKenna, a columnist for The Washington Times, co-hosts “The Unregulated Podcast.” He was most recently a deputy assistant to the president and deputy director of the Office of Legislative Affairs at the White House.
