IRS Funding to Be Cut Faster Thanks to GOP Pressure in Spending Deal Talks: Speaker Johnson

House Speaker Mike Johnson (R-La.) speaks at a press conference at the U.S. Capitol in Washington on Dec. 12, 2023. Kevin Dietsch/Getty Images

Republicans have managed to secure faster funding cuts to the IRS in the recently-announced deal with Democrats on top-line spending numbers for a government funding measure, meaning roughly 25 percent of the recent $80 billion funding boost for the IRS will evaporate as quickly as this year.

The Inflation Reduction Act that President Joe Biden signed into law in 2022 initially included around $80 billion to expand the IRS’ budget over ten years. This drew the ire of Republicans, who argued that much of that money would go to hiring an “army” of tax enforcers who would reach for low-hanging fruit and target ordinary Americans rather than wealthier, more financially sophisticated taxpayers who are trickier to audit.

That $80 billion in additional IRS funding was pared down to $60 billion due in last year’s debt-ceiling deal struck between President Biden and then-House Majority Leader Kevin McCarthy (R-Calif.). That deal clawed back $10 billion in each of the calendar years 2024 and 2025 from the tax agency’s appropriations.

But now, amid a fresh round of negotiations on a new spending package to avert a government shutdown in the coming weeks, House Speaker Mike Johnson (R-La.) said he managed to win an accelerated timeframe for the IRS cuts.

“The concessions we achieved will include an additional $10 billion in cuts to the IRS mandatory funding (for a total of $20 billion)” in fiscal year 2024, Mr. Johnson wrote in a Jan. 7 letter to his Republican colleagues, in which he notified them that he had reached a tentative deal with Democrats on $1.59 trillion in top-line spending for the current fiscal year.

The new timetable means that the $10 billion in cuts that were slated for 2025 will now come in 2024, meaning that 25 percent of the IRS’ $80 billion funding boost will be eliminated this year.

House Speaker Mike Johnson (R-La.) speaks during a news conference at the U.S. Capitol in Washington on Dec. 5, 2023. Drew Angerer/Getty Images

Slashing IRS funding more quickly was met with criticism from left-leaning groups, including the think tank Center on Budget and Policy Priorities (CBPP).

“It is deeply unfortunate that House Republicans demanded that $10 billion in already agreed-upon funding cuts to the IRS slated for 2025 be accelerated to 2024, again putting tax cheaters’ interests ahead of honest taxpayers,” she said in a statement. “Any further cuts to the IRS should be rejected.”

Groundwork Action, the campaign arm of Groundwork Collective, a progressive think tank that promotes left-wing economic policies, said that for every $1 the IRS spends auditing “wealthy tax cheats, America sees $22 in return” while accusing House Republicans of being “extremists” who are demanding IRS cuts in exchange for avoiding a government shutdown.

Abolish The IRS?

In his letter, Mr. Johnson said that the final overall spending levels (not just regarding the IRS) “do not cut as much spending as many of us would like,” but they do move the process forward and reprioritize funding “towards conservative objectives,” which have in the past included calls to reduce funding for the IRS—or even abolish it entirely.

Republicans have repeatedly raised the issue of abolishing the IRS, for instance, in January 2023 by introducing the Fair Tax Act, which would overhaul the tax system by eliminating the income tax in favor of a national sales tax—and eliminate the need for the IRS.

“Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill will eliminate the need for the department entirely by simplifying the tax code with provisions that work for the American people and encourage growth and innovation,” Rep. Buddy Carter (R-Ga.), sponsor of the bill, said in a statement in January 2023.

“Armed, unelected bureaucrats should not have more power over your paycheck than you do,” Mr. Carter added.

The bill, which was introduced in the House and referred to the Ways and Means Committee (where it has remained ever since), would eliminate income, death, gift, and payroll taxes and replace the system with a 23-30 percent national sales tax.

The measure would have lowered federal spending by over $71 billion while reducing tax revenues by nearly $186 billion over 10 years, according to the Congressional Budget Office (CBO).

Democrats opposed the measure, introducing a House resolution to nix it while calling the Fair Tax Act a “disaster for working families and individuals.”

A complimentary Senate resolution was later introduced by Democrats, who called Mr. Carter’s initiative “misguided.”

Rep. Buddy Carter (R-Ga.) speaks during a budget hearing to discuss President Joe Biden’s budget for the fiscal year 2023, in Washington, on March 29, 2022. Roberto Schmidt-Pool/Getty Images

‘Burdensome Taxation Smothering Growth’

In April 2023, Sen. Ted Cruz (R-Texas), who has repeatedly called for defunding the IRS, once again issued a similar rallying cry on the occasion of Tax Day 2023.

“I am more determined than ever to bring the IRS to heel. We should stop the weaponization of the tax code, abolish the IRS, and start over,” Mr. Cruz said in a statement. We should reform the income code to make it simple and fair. Tax returns should be simple enough to fit on a postcard.

“Americans have had enough of the Democratic double-whammy of cynical, manipulative power politics and burdensome taxation smothering growth and opportunity. There is a better way, and Tax Day is a good day to remember that,” he added.

A number of Republicans have, over the years, proposed various alternatives to the current income tax code.

Former House Speaker New Gingrich released a tax plan during the 2012 presidential election campaign that would include a 15 percent flat tax for individuals, a 12.5 percent tax rate for businesses, and zero investment taxes.

Sen. Rand Paul (R-Ky.) revived that idea in 2015 with the Flat and Fair Tax, a policy that would institute a 14.5 percent tax rate on all income while replacing the corporate tax with a 14.5 percent business transfer tax.

Mr. Paul’s tax reform plan would grow the economy by 12.9 percent and create 4.3 million jobs, although it would result in $2 trillion in less revenue, according to a model from the Tax Foundation.

Meanwhile, in his “Dear Colleague” letter, Mr. Johnson noted that the tentative deal would include an additional $16 billion in spending cuts over the previously negotiated framework and a $30 billion overall reduction compared to the Senate’s original spending plan.

Some Republicans have been critical of the deal because it doesn’t include provisions to tighten border security.

The tentative agreement could also fall by the wayside and be replaced by a continuing resolution.

Senate Republican Leader Mitch McConnell (R-Ky.) said on Jan. 9 that Congress would “obviously” have to pass a continuing resolution because time is too tight to finalize the 12 regular government funding bills ahead of a looming deadline despite the tentative deal on top-line spending.

Under a stopgap spending bill put forward by Mr. Johnson last year, which passed the House with 93 Republicans and two Democrats opposing it, the United States will go into a partial government shutdown on Jan. 19 if spending bills are not agreed to.