Yellen defends request for $29 billion increase in IRS enforcement funds

By David Lawder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Friday defended a Biden administration budget request for an additional $29.1 billion in IRS enforcement funds as Republicans in Congress pressed her to explain how $80 billion funds approved last year would be spent.

The budget proposal aimed at boosting tax enforcement and collections comes on top of a fiscal 2024 appropriations request of $14.1 billion, marking an increase of $1.8 billion, or 15% over the 2023 IRS budget.

The additional IRS funding requests contained in President Joe Bidens budget plan announced on Thursday drew the ire of Republicans on the House Ways and Means Committee, where Yellen testified on Friday. The budget includes hefty tax increases on wealthy Americans and corporations to bring down deficits over the coming decade.

“You already got $80 billion for the IRS. Now you want $43.2 billion more, all without explaining what will be done with the first $80 billion,” said Ways and Means Chairman Jason Smith, adding the two budget requests.

“The American people, they deserve to know how their hard earned tax dollars are being spent and the impact that a supercharged IRS will have on them,” the Missouri Republican added.

Yellen said she would unveil “in the coming weeks” a promised spending plan for the $80 billion in IRS investments approved last year as part of the climate and healthcare-focused Inflation Reduction Act.

The additional $29.1 billion in long-term enforcement investments would add two more years to the $80 billion program for 2032 and 2033, according to the budget. The Treasury estimates that this would produce an additional $105 billion in net revenue from collections during those two years.

Republicans fear that the IRS will hire an “army” of 87,000 agents and harass small business owners with onerous audits, claims denied by Yellen.

She repeated her vow not to use the IRS investment funds, aimed at rebuilding the IRS audit capabilities after more than a decade of budget cuts under past Republican-controlled Congresses, to increase audit rates for Americans and small businesses earning less than $400,000.

Yellen also said that the “vast majority” of hiring at the agency from the $80 billion would go towards replacing retiring employees over the next decade.

(Reporting by David Lawder; Editing by Emelia Sithole-Matarise)