President Joe Biden reportedly wants to give the Internal Revenue Service an additional $80 billion and more authority to help crack down on tax evasion by high-earners and large corporations.
Two people familiar with the plan told The New York Times the president sees the efforts as a way to help pay for his massive economic plan.
Besides the money and increased enforcement power, Biden’s proposal includes new disclosure requirements for people who own businesses not organized as corporations, and for other wealthy people who might be hiding income from the government.
Administration officials believe aggressive crackdown on tax avoidance by corporations and the wealthy could raise at least $700 billion on net over 10 years.
The initiatives, combined with new taxes on corporations and the wealthy, are proposals that could level the tax playing field between average American workers and very high-earners who try to minimize or avoid taxation, according to the Biden administration.
Revenue from these efforts will be used to help pay for Biden’s “American Families Plan,” which the president will detail before addressing a joint session of Congress on Wednesday.
The $80 billion in proposed funding would be an increase of two-thirds over the agency’s entire funding levels for the past decade.
Biden also wants to invest heavily in information technology improvements that could help the agency better target its audits of high-earners and companies.
“This is the broadly right approach,” Harvard University economist Lawrence H. Summers said. “Deterioration in IRS enforcement effort and information gathering is scandalous. The Biden plan would make the American tax system fairer, more efficient and, I’m confident, raise more revenue than official scorekeepers now forecast — likely a trillion over 10 years.”
The Biden administration’s “American Families Plan” plan is expected to cost at least $1.5 trillion, and follows Biden’s $2.25 trillion infrastructure package. The Times said the plan will include universal prekindergarten, a federal paid leave program, efforts to make child care more affordable, free community college for all, and tax credits meant to fight poverty.
Also to help pay for the “American Families Plan,” the administration wants to raise the top marginal income tax rate for wealthy Americans from 37% to 39.6%, and raise capital gains tax rates for those who earn more than $1 million a year.
A person familiar with the proposal also said Biden wants to raise the tax rate on income that people earning more than $1 million per year receive through stock dividends.
The Times on Tuesday said the administration is expected to portray the $780 billion it expects to collect through enhanced IRS enforcement as conservative. That total includes only money directly raised by enhanced tax audits and additional reporting requirements. It does not include any money from people or companies choosing to pay more taxes after previously avoiding them.
Summers, University of Pennsylvania economist Natasha Sarin, and other members Biden’s economic team suggest as much as $1.1 trillion over a decade could be raised via increased tax enforcement.
Closing the so-called tax gap — the amount of money that taxpayers owe but that is not collected each year — has been discussed for years.
IRS Commissioner Charles Rettig this month told a Senate committee the agency lacked the resources to catch tax cheats, costing the government as much as $1 trillion a year.
IRS funding has failed to keep pace with inflation amid budget tightening efforts. Also, its audits of rich taxpayers have declined.
Source: Newmax
