Already anticipating funding cuts under a new Trump administration, U.S. Treasury officials are now urgently calling on Congress to release $20 billion in IRS enforcement funds that have been frozen due to legislative language. With upcoming budget negotiations on the horizon, Treasury officials are racing against time before President Joe Biden's term concludes. This $20 billion is distinct from the $20 billion that was previously rescinded from the agency last year. However, a legislative mechanism keeping the government operational inadvertently duplicated the one-time cut. Treasury officials are warning of severe consequences if this funding is effectively withdrawn through inaction. The loss of this money would lead to a significant increase in the national deficit by $140 billion, as stated by Treasury Deputy Secretary Wally Adeyemo during a call to reporters on Tuesday. It would result in 6,000 fewer audits of wealthy individuals and 2,000 fewer audits of large corporations, and the agency would be forced to implement a hiring freeze. Adeyemo emphasized, "The IRS is likely to have to make crucial decisions regarding halting hiring and starting to budget for a situation where they don't have $20 billion, which will halt a great deal of their progress. If they don't secure that $20 billion at risk, they will run out of enforcement money at the current rate sometime in fiscal year 2025." The IRS Funding Crisis and Its Far-Reaching Implications
Impact of Funding Cuts on IRS Operations
The loss of the $20 billion in enforcement funds would have a profound impact on the IRS's ability to carry out its duties. Without this funding, the agency would face challenges in conducting audits of wealthy individuals and large corporations. As a result, there would be a significant decrease in the number of audits, which could lead to potential tax evasion going undetected. Additionally, the hiring freeze would limit the agency's ability to expand and improve its operations. This could have long-term consequences for the effectiveness of tax collection and the overall integrity of the tax system.Consequences for the National Deficit
The potential loss of $140 billion due to the withdrawal of IRS enforcement funds would have a direct impact on the national deficit. With the federal debt already standing at roughly $36 trillion and inflation pushing up borrowing costs, every dollar counts. The increased deficit could have implications for the overall economic stability of the country and may require further measures to address. It highlights the importance of maintaining adequate funding for the IRS to ensure the proper functioning of the tax system and the financial health of the nation.Political Landscape and IRS Funding
The news comes at a time when President-elect Donald Trump and a Republican majority in the Senate and House of Representatives are set to bring major policy changes. While Trump has focused on his proposed tax plans, he has not explicitly stated that he would cut the IRS's budget. However, there are concerns among congressional Republicans about taking back the agency's modernization funding and cutting the IRS's Direct File program. These actions could further exacerbate the funding crisis and have a negative impact on the IRS's ability to serve the public. It remains to be seen how these political developments will unfold and what impact they will have on the future of IRS funding.
