IRS controversies of the present, past haunt lawmaker talks

IRS controversies from the Obama era and much more recently that have left Republicans even more disillusioned with the nation’s tax collecting army are emerging as a real problem for getting a $1.2 trillion bipartisan infrastructure deal done.

The IRS has long been a favorite boogeyman among conservative politicians who love to bash it, and Democrats might see it as a convenient target for GOP lawmakers who in their view do not want to back an infrastructure deal that if passed by Congress would be a significant victory for President Biden.

But there are also legitimately negative feelings among GOP senators and House members over the 2013 controversy when the IRS gave extra scrutiny to conservative groups applying for tax-exempt status.

More recently, Republicans were angered by the leak of a trove of IRS information on the relatively modest tax payments by some of the nation’s wealthiest individuals, including Jeff Bezos, Elon Musk, Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg.

No evidence has surfaced linking the leak to the IRS, but suspicions have been raised by Republicans and conservative commentators given the small pool of people seen as having access to the records. Rep. Kevin Brady (Texas), the top-ranking Republican on the Ways and Means Committee, called it “an astonishing breach of trust that should make taxpayers very concerned.”

How is the IRS involved with the infrastructure talks?

Provisions to pay for the infrastructure bill have been a huge sticking point for Republicans and Democrats, but there is support for the proposal from a group of moderate Republicans to increase the IRS’s funding by $40 billion — more than three times the agency’s annual operating budget — to beef up enforcement in hopes of collecting $140 billion in new revenues.

The Biden administration hopes to eventually boost IRS funding by a total of $80 billion.

Eleven Senate Republicans say they support the bipartisan framework in principle but keeping them all on board will be a tough task as they are coming under fire from conservatives who warn that beefing up the IRS will trigger an avalanche of future audits.

A number of conservative groups oppose that measure, however, and their voices are growing louder.

Grover Norquist, the president of Americans for Tax Reform, a group that advocates for smaller government and lower taxes, warned Republican lawmakers not to support any increased funding for the IRS until officials responsible for the leak of tax documents and other breaches are identified and disciplined.

“No Republican should put their fingerprints on more money to the IRS until we have put people in prison over the recent breach of data, until somebody has gone to jail,” he said.

After the 2013 controversy, the IRS eventually acknowledged its treatment of some groups was “unnecessary” and apologized.  

But that did little to quiet GOP critics, who used the IRS controversy to attack then-President Obama and made it a part of their successful effort in 2014 to win back the Senate majority.

Conservatives have never forgiven the IRS over the targeting, and the IRS came under more criticism this month when its new director of exempt organizations, Stephen Martin, denied an application for tax-exempt status from a group called Christians Engaged, which is focused on encouraging and educating Christians to be civically engaged.

Martin informed the group that it “engaged in prohibited political campaign intervention” but then reversed course after a group of conservative lawmakers complained.

Norquist predicted that Republican support will peel off the bipartisan package because of the proposed IRS funding increase.

“At the end of the day, I don’t think any Republican will vote for a package that includes this plus-up in money for the IRS,” said Norquist, who also pointed to other problems in the bill.

Norquist predicted that small businesses would bear the brunt of increased IRS activity as the result of new funding.

The IRS announced at the end of last year that it would increase its audit of small businesses by 50 percent in 2021.

“This is one of the most abusive and intrusive agencies of government and hiring 80,000 more IRS agents will be extremely problematic for tax filers,” said Stephen Moore, a conservative economist and adviser to former President Trump.

He said for Republicans “to hand over that kind of power to the IRS would be — for a party that believes in limited government — would be very hypocritical.”

Moore and Norquist are among a group of conservative activist leaders lobbying Senate Republicans to back away from the bipartisan infrastructure plan. They have circulated a letter among GOP lawmakers urging them not to support any new funding for the IRS.

There are powerful interests backing the package. It received a big political boost Thursday when a coalition of labor and business groups, including the U.S. Chamber of Commerce and the AFL-CIO, endorsed it.

Other business groups voicing support for the proposal were the Business Roundtable, the National Association of Manufacturers and the National Retail Federation.

But the National Federation of Independent Business, a powerful political player, notably did not sign the joint statement of support.

Several Senate Republicans have raised concerns about a major influx of funding for the IRS, including Sen. Mike Rounds (R-S.D.).

“I’m one of the skeptics on that,” he told The Hill before the Senate left Washington for a two-week recess. “But, look, this is something Democrats wanted as part of the package. I don’t think it will achieve what they think it will achieve.”

Another Senate Republican who requested anonymity to discuss likely pushback to the bipartisan framework predicted that he and his colleagues would hear an earful from constituents concerned about the prospect of an avalanche of IRS audits resulting from higher IRS funding.  

Rachel Bovard, the senior director of policy at the Conservative Partnership Institute, said “Lois Lerner looms large in a lot of conservatives’ minds, and for good reason.”