On The Money — IRS will focus on auditing the rich, Yellen says

The Biden administration wants the public to know that $80 billion in new IRS funding won’t result in more audits for the average taxpayer. We’ll also look at falling wholesale inflation figures, gas finally dropping below $4 and the FTC’s consumer privacy initiative.  

But first, read about why dried up lakes should concern everyone.  

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here. 

Yellen tells IRS not to use new funding to increase middle-class audits 

Treasury Secretary Janet Yellen directed IRS officials not to use new funding secured for the agency in Democrats’ Inflation Reduction Act to increase audits on households making under $400,000 annually. 

In a letter to IRS Commissioner Charles Rettig, Yellen reaffirmed a commitment “that audit rates will not rise relative to recent years for households making under $400,000 annually,” which she described as a “guiding precept of the planning” for the agency. 

• Democrats have set their sights this week on approving roughly $80 billion in funding to strengthen the office, which has seen its funding and staffing decline for roughly a decade. 
• The message is in response to warnings from GOP lawmakers that the agency would hire tens of thousands more IRS agents and increase audits that would impact those below the $400,000 threshold. 
• In her letter, Yellen specifically directed that no additional resources, including any new personnel or auditors that are hired as part of the proposed funding, should be “used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.” 

Yellen also stressed the IRS’s “enforcement resources will focus on high-end noncompliance,” as Democrats say the proposed funding is aimed at going after wealthy tax cheats. 

The IRS funding proposal is one of several tax-related provisions included in the Inflation Reduction Act to raise revenue to help cut the nation’s deficit over the next decade, while also offsetting investments in health care and climate. 

Aris breaks it down here. 

PRICE DROP 

Wholesale prices decline 0.5 percent as inflation eases in July 

Wholesale prices dropped 0.5 percent in July to hit a 9.8 percent annual increase, down from an 11.3 percent annual increase in June as 40-year high inflation continued to show signs of easing. 

The Labor Department’s producer price index showed that demand for goods dropped 1.8 percent from June to July as demand for services increased only 0.1 percent. 

• Excluding the more volatile categories of food, energy and trade, prices rose 0.2 percent in July to hit a 5.8 percent increase on the year, down from 6.4 percent from last month. 
• The wholesale numbers reinforce that inflation slowed last month after Wednesday’s report showed consumer prices falling from 9.1 to 8.5 percent.  
• It’s unclear, however, whether the numbers represent a temporary blip or a broader trend. 

Tobias Burns has the details here. 

STEP ON THE GAS 

Average US gas price falls below $4 per gallon 

Recent data shows the average national price of gasoline fell below $4 per gallon on Thursday for the first time since March, and experts are expecting the downward trend to continue. 

Prices averaged $3.99 on Thursday, AAA said. The drop represents a dip of more than $1 since prices peaked in June at about $5.02. 

• Andrew Lipow, president of Lipow Oil Associates, told The Hill that he expects an additional decline of about 5 cents per gallon in the coming weeks and a further drop of about 15 cents per gallon after mid-September, when refiners are able to sell lower-cost winter gasoline. 
• Patrick De Haan, GasBuddy’s head of petroleum analysis, predicted that prices could fall between an additional 10 and 25 cents per gallon in the coming weeks. 

The Hill’s Rachel Frazin has the rundown here. 

PRIVATE MATTERS 

FTC launches effort to review, update data privacy rules 

The Federal Trade Commission (FTC) will launch an effort to review and update rules on how companies collect and use data, the agency announced Thursday.  

The FTC said it will explore rules to “crack down on harmful commercial surveillance and lax data security,” expanding on Democratic Chair Lina Khan’s aggressive action targeting tech companies.  

• The FTC’s decision to move forward with a process to review and update data privacy protections comes as Congress is weighing proposals aimed at creating a comprehensive federal data privacy law.  
• The House Energy and Commerce Committee advanced the American Data Privacy Protection Act (ADPPA) last month with bipartisan support. A version of the bill has been introduced in the Senate, but it lacks support from Senate Commerce Committee Chair Maria Cantwell (D-Wash.), hindering its chances of moving forward.  

Get more details here from The Hill’s Rebecca Klar. 

Good to Know 

New applications for unemployment benefits rose slightly in the first month of August to the highest level since November, according to Labor Department data released Thursday.  

Jobless claims totaled 262,000 in the week ending Aug. 6, up 14,000 from the previous week’s revised total. Claims continue to hover around pre-pandemic levels, but they’ve risen in five out of the last six weeks. 

Here’s what else we have our eye on: 

• Congress is on the verge of rolling back a significant debt relief program intended to provide aid to farmers of color after the Democratic-led effort hit a roadblock last year following legal challenges brought by white farmers claiming discrimination. 

• The Centers for Disease Control and Prevention (CDC) on Thursday relaxed many of the guidelines for COVID-19 in communities, a major shift that emphasizes living with the virus rather than strict prevention of infection. 
• The Federal Election Commission (FEC) voted Thursday to allow Google to push forward a Gmail pilot program that would allow campaign emails to dodge spam filters, a move that comes after accusations from Republicans that the filters were biased against their messages. 

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.