CBO: GOP’s IRS bill will add $114B to deficit

The Republican proposal to eliminate billions of dollars in IRS funding will pile more than $100 billion onto federal deficits, according to a new estimate from Congress’s official budget scorekeeper.

The bill, which is slated to hit the House floor Monday night as the first legislative act of the new GOP majority, would claw back most of the almost $80 billion in new IRS funding provided under the Democrats’ massive climate, health and tax package, which was signed by President Biden last year. 

Almost $46 billion of that spending would go toward agency enforcement efforts designed to prevent certain taxpayers — largely corporations and wealthy individuals — from paying less than they owe. 

The Congressional Budget Office (CBO) estimated Monday that the legislation would cut federal spending by $71 billion, but would reduce tax revenue to the tune of almost $186 billion. The net effect would be a $114 billion increase in deficits over the next decade. 

The numbers were not overlooked by Democrats, who wasted no time hammering Republicans for vowing to rein in deficit spending, then defying that promise in their first act of business.

“It’s a giant tax cut for rich tax cheats,” White House chief of staff Ron Klain tweeted on Monday.  “Bill #1 from the new House GOP. Adds to the deficit.”

Republicans had made the IRS funding cut a top promise on the midterm campaign trail, warning that the money would lead to the hiring of 87,000 new tax collectors to target middle-income Americans. Some Republicans said those agents would be armed. 

Those claims were highly misleading, however, as much of the funding will go to hire thousands of customer service agents and other employees with no auditing responsibilities. And the 87,000 figure is a reference to the total number of employees — not just auditors — the IRS hopes to hire over the next decade, when 52,000 workers are expected to retire.  

Additionally, Treasury Secretary Janet Yellen has said that, while the new funding is crucial to streamline processing and eliminate the backlog of returns, the agency will not increase audit rates for those taxpayers making less than $400,000. 

Still, few government agencies are less popular than the IRS, and the Republican message appeared to resonate with the GOP base. 

“On our very first bill, we’re going to repeal 87,000 IRS agents,” Rep. Kevin McCarthy (R-Calif.), who was newly elected as Speaker, said last year as he unveiled the Republicans’ agenda. “Our job is to work for you, not go after you.”

Zach Moller, who previously worked as a Senate Democratic budget aide, says the GOP’s bill would violate previous House rules targeting legislation that would add to the deficit, known as PAYGO, that were in effect when Democrats held control.

Under the prior rules, Moller explained, it wouldn’t be in order for lawmakers to “have a bill on the floor that increases the deficit over the first five or seven or first 10 years.” The PAYGO rules were often waived, but aimed at fiscal responsibility, Moller said.

The Republican majority is expected on Monday to pass a new set of rules governing the new Congress, to include a so-called “CUTGO” rule that exempts tax cuts from the deficit spending prohibitions.