Larry Summers: IRS proposal will generate more revenue than CBO estimate

Larry Summers, who served in top economic policy roles during the Clinton and Obama administrations, said Thursday that the IRS funding proposal in Democrats’ social spending bill is likely to raise more revenue than the Congressional Budget Office (CBO) is expected to estimate.

“I have one central message, and that is that it is reasonable to rely on substantially more revenue than is included in the CBO projection from efforts to strengthen the IRS,” Summers said on a call with reporters hosted by the Center for American Progress.

Summers’s comments come as the CBO is expected as soon as Thursday to release its cost estimate of the section of the spending bill that includes the IRS proposal.

The proposal would provide the IRS with an additional $80 billion for enforcement and modernizing its technology. The Treasury Department has estimated that the IRS provision would increase net revenues by $400 billion over 10 years, while the CBO is expected to produce an estimate of around $150 billion.

A group of moderate House Democrats has sought more information from the CBO prior to voting on the bill, in order get assurances that the bill is fully paid for. Summers, who has long supported increasing IRS funding, joins many administration officials in arguing that the CBO’s expected revenue estimate for the IRS provision will be too low.

Some of the moderates have indicated that they are prepared to accept the discrepancy between the Treasury and CBO estimates, so the difference is unlikely to prevent the House from voting to pass the spending package this week.

Summers gave several reasons why he thinks the forthcoming CBO estimate will be too conservative during the call with reporters and in a Washington Post op-ed. These included that the CBO’s estimate doesn’t account for the benefits of improved taxpayer services and technology and the the CBO estimate doesn’t account for a sizable impact that increased IRS funding will have on taxpayer behavior.

Summers has been critical of the Biden administration on other issues, such as inflation, but is in line with the White House on IRS funding.

“When I’m not in government, I try to speak to economic issues where I think I have some knowledge with my best analysis and opinion, whatever the issue is,” Summers told reporters. “I don’t judge by the team I think it might help or which team I think it might hurt.”