In a functioning democracy, taxpayers fork over some money to the government and get useful things like roads and bridges in return.
Republicans in Congress don’t see it that way. The so-called “bipartisan infrastructure framework,” or BIF, that 20-something senators of both parties are trying to hammer out needs to include more than $500 billion in new revenue for the spending it will supposedly include. New government revenue is hard to come by because it usually involves tax hikes one party or the other refuses to consider.
President Biden’s big idea is to beef up tax enforcement at the beleaguered Internal Revenue Service, to collect many billions of dollars in taxes wealthy people owe but don’t pay each year. For Biden, it’s a way to raise a lot of money, in theory, that he can spend on promised road and bridge projects. For Republicans, it ought to be a way to pay for something Americans generally support without an actual tax hike. But what ought to be a sensible funding mechanism for sensible legislation may now derail the whole package.
The latest Republican outrage campaign posits that more funding for the IRS will lead to harassment of ordinary taxpayers. “Rather than giving tens of billions of dollars to the IRS to harass and persecute American taxpayers, I think we should abolish the IRS and instead adopt a simple flat tax," Republican Sen. Ted Cruz of Texas said of the BIF funding provision. Cruz isn’t one of the dozen or so Republicans working on the bill, but his attack hints at the risks for more moderate Republicans who might support it: Republican attack ads in the 2022 midterm elections will likely trash politicians seeking to empower the IRS, including moderate Republicans, if necessary.
A political issue that shouldn't be
Proper funding for the IRS shouldn’t even be a political issue. Yet Congressional Republicans have managed to shackle the agency for a decade by whacking away at its budget, leading to staff cuts and aging technology unable to keep up with schools of tax sharks who help wealthy Americans avoid paying what they owe.
The annual “tax gap,” or the amount of tax Americans owe but don’t pay, could plausibly be $400 billion or more. That’s more than two-thirds of the new needed in the BIF. Biden says an extra $80 billion in new IRS funding could bring in as much as $700 billion in new revenue over a decade. Other estimates are lower, but it is almost certainly a positive return on federal spending.
Most major tax evaders are wealthy people who earn income from investments and other non-labor sources. Ordinary workers earning most of their income from labor can’t really evade taxes, because employers withhold it automatically (except for those working in cash businesses). Taxes aren’t automatically withheld from most investment income, however, and there are dozens of schemes, both legal and illegal, for whittling investment tax to nearly nothing. The massive underpayment of taxes by America’s wealthiest citizens is an existential dysfunction that wrecks trust in the system and leaves the Treasury woefully underfunded.
Banana Republicans opposed to giving the IRS the tools to do its job are endorsing a kind of oligarchy that serves the rich at everybody else’s expense. Sure, the Treasury can borrow indefinitely to make up the difference, but the reckoning that will come someday will fall on Medicare and Social Security recipients and degrade faith in the system even more.
The bipartisan infrastructure talks may be a sham, with a handful of senators from both parties faking it so they can tell the moderates in their respective corners, well, we tried. Biden wants to show he can work with Republicans, to keep some of the centrist Independent voters who helped him win the presidency in 2020. Some Republicans are still making the case that there’s a governing philosophy in the party, even if it’s drowned out by the rabid Trump mob. It’s all largely posturing.
If the BIF sinks, Democrats will then have the go-ahead to put everything they can agree on in a giant “reconciliation” bill they can pass with a simple majority of 51 votes in the Senate, bypassing the filibuster. That bill likely would include the extra IRS funding Biden wants. But Republicans will then spend the next year telling voters how evil the IRS is, like the Covidiots who attacked store security guards for asking them to wear masks during the coronavirus pandemic. It’s obvious what the right move is, but if you can convince people otherwise, go for it.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.
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