A $1.66 trillion top-line spending deal reached by congressional leaders will reduce funding to the Internal Revenue Service, an issue favored by Republicans.
The deal would slash $10 billion from the IRS in fiscal 2024, one year earlier than both sides of the aisle agreed to in a deal to raise the debt limit last summer, The Hill reported — including $20 billion in overall reductions to a controversial IRS funding boost.
The IRS was set to get $80 billion in funding through the 2022 Inflation Reduction Act.
"The concessions we achieved will include an additional $10 billion in cuts to the IRS mandatory funding [for a total of $20 billion], which was a key part of the Democrats' 'Inflation Reduction Act,'" House Speaker Mike Johnson, R-La., wrote in a letter to fellow legislators, The Hill reported.
"While these final spending levels will not satisfy everyone, and they do not cut as much spending as many of us would like, this deal does provide us a path to … move the process forward [and] reprioritize funding within the topline towards conservative objectives," Johnson said in a potential indication of further pressure on the IRS in the future, The Hill noted.
According to The Hill, Republicans are paving the way for additional drawdowns in subsequent years, especially if they win big in 2024. The new timetable also means one-quarter of the $80 billion funding bump for the IRS over the next decade has been nixed entirely within fiscal 2024.
"This is a commitment. It's actually going to happen," Janet Holtzblatt, former head of tax policy studies in the tax analysis division of the Congressional Budget Office, told The Hill. "It does quietly open the door for more cuts down the road.
"The cuts in the past have already been established. There is that room now to cut forward. [In no way] is it a good thing for the IRS."
Democrats claim the new timetable for IRS cuts won't disturb the agency's modernization.
"This money did give the agency certainty with respect to hiring, because you just can't bring in people one year and then say, 'OK, we can't have them the next,'" Holtzblatt told The Hill.
The Congressional Budget Office estimated the initial $80 billion funding bump for the IRS over the subsequent decade would result in $200 billion in additional revenue, for a net deficit reduction of around $120 billion, or around $12 billion a year.
That's 1.7% of the annual tax gap, which is the amount of money owed to the government each year but isn't collected, The Hill reported
Most of that comes from people and companies underreporting what they owe. Underreported taxes totaled $542 billion in tax year 2021 from an average $445 billion in tax years 2017-2019.
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