Better-Funded IRS Should Increase Audits of the Top 1%, Democrats Say

The Internal Revenue Service should focus new audits solely on large corporations and households earning more than $400,000 annually, Senator Elizabeth Warren and 24 other Democrats told the agency.

(Bloomberg) — The Internal Revenue Service should focus new audits solely on large corporations and households earning more than $400,000 annually, Senator Elizabeth Warren and 24 other Democrats told the agency.

The IRS, which has $80 billion in new funding from last year’s landmark economic package, shouldn’t increase reviews of Americans making less than $400,000, particularly low-income families, the Democrats said in a letter late Wednesday.

“It is time to ensure that the top 1% of wealthy Americans — who account for more than a third of all unpaid federal income tax, yet have seen their audit rates decline dramatically in the past decade —meet their responsibilities,” the senators said in the letter, obtained by Bloomberg News. “The IRS must ensure that the wealthy are not audited at lower rates than low-income taxpayers.”

As Republicans and Democrats wrestle over funding the federal government and increasing the debt limit, audits are likely to remain a political flashpoint. Republicans say the expansion of tax audits is government overreach.

The nonpartisan Congressional Budget Office projects that the $80 billion investment in tax enforcement will yield an additional $204 billion in revenue over the next decade. But other estimates, including some internal Treasury Department figures, suggest it could be much higher.

The IRS has a lot of ground to cover. The agency scaled back audits of all taxpayers between 2010 and 2019, with the total audit rate falling to 0.25% from 0.9%. The largest drop has been among those reporting $5 million or more in income. They have a 2.4% chance of being audited, down from more than 16% a decade ago, according to the Government Accountability Office.

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