The White House is engaged in a heated battle with conservatives over what impact a new spending bill will have on the IRS, how much the agency will grow, and who will become the target of the agency’s strengthened enforcement muscles.
The Democrats-only Inflation Reduction Act includes some $80 billion for the IRS, which will allow it to hire nearly 87,000 new employees by 2031 and bring in an additional $200 billion in tax revenues. Yet the Biden administration is claiming that none of this additional revenue will come from audits of taxpayers earning $400,000 or less.
“This is focused on those who are corporate, wealthy tax cheats that congressional Republicans wanted to defend,” said White House press secretary Karine Jean-Pierre in response to a reporter’s question on Tuesday. “That’s who they wanted to defend. They wanted to defend those corporate tax cheats. This is not about that. This is not about folks who make less than $400,000.”
The reporter continued, “So no new audits on anybody making under $400,000 a year?”
“No,” Jean-Pierre responded. “Very clear, no.”
Republicans have come out in force claiming the opposite — that the bill will result in increased audits for taxpayers at all income levels.
Sen. Mike Crapo (R-ID), ranking member of the Finance Committee, said the act “will do nothing to bring the economy out of stagnation and recession, but it will raise billions of dollars in taxes on Americans making less than $400,000,” while Republican National Committee spokesman Tommy Pigott fired off a response that included a meme saying President Joe Biden would “send an army of auditors after grandma and lemonade stands.”
They point to a Joint Committee on Taxation report that estimates between 78%-90% of new money raised will come from tax filers reporting less than $200,000 in income, with only 4%-9% coming from those earning more than $500,000.
While Biden began a vacation on Wednesday, administration officials, including Jean-Pierre and Treasury Secretary Janet Yellen, have countered these attacks. The White House has also promoted stories from Time, the Washington Post, and the Associated Press holding that the total number of IRS employees would only grow by between 20,000 and 30,000 and that the growth would only restore the agency to roughly the size and influence it held in 2010.
Yellen, in a letter to IRS Commissioner Charles Rettig, appears to make a more nuanced point that audits on the middle class will not grow relative to the number of audits on high earners — not that they won’t grow at all.
“I direct that any additional resources — including any new personnel or auditors that are hired — shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” Yellen wrote. “That means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”
A Congressional Budget Office post similarly concedes that the audit rate would rise for all taxpayers if the IRS receives more funding.
Democratic strategist Brad Bannon argues the Biden administration should stick to a message that the effort is about making sure everyone pays what they owe every year in taxes.
“If I was the administration spokesman, I would say it’s clear that the spirit of this legislation is designed to make people pay their fair share of taxes and that the audits will be emphasized on wealthy Americans and big corporations who don’t pay their fair share,” he said.
Bannon points to a Gallup poll that has consistently found that two-thirds of people think the wealthy and big business pay too little in taxes, while less than 10% say the same of middle-income people.
The White House knows the importance of winning the messaging battle. On a call with reporters Wednesday morning, a senior administration official said Biden considers success the ability to explain to the public what the administration is doing.
Yet administration officials have consistently made mathematical claims that draw scrutiny.
Along with Jean-Pierre’s statement about no new audits, Biden officials and the president himself said earlier this week that there was “0% inflation” in July, a technically true but highly misleading statement.
The typical inflation figure used by economists and the press is year over year, of which July’s was 8.5%, continuing a string of highs not seen since the early 1980s.
Biden was referring to the month-over-month figure, which compares inflation to where it was just one month prior and is typically much less discussed. That figure has ranged from 0.3% to 1.3% since January.
In July, administration officials quarreled with the meaning of the word “recession” in July, arguing that two consecutive quarters of negative gross domestic product growth is not the “technical definition.”
The string of claims has led to ridicule from conservative elected officials.
“The Biden Administration has a tortured relationship with math,” Rep. Virginia Foxx (R-NC) joked on Twitter, adding that “8.5% [is not equal to] 0” in reference to the inflation figures.
They also say the president’s statements are at times contradictory.
“First President Biden assures us that, ‘we’re not in a recession’ following our second negative GDP report and now, after yesterday’s CPI report clearly showed year over year inflation is at 8.5%, he is claiming that our economy had 0% inflation in July,” Job Creators Network CEO Alfredo Ortiz said in a statement.
“The administration cannot have it both ways,” Ortiz continued. “They are blatantly lying to the American people by misrepresenting economic indicators to give the appearance that things are improving while simultaneously insisting that inflation is so dire, we need to spend hundreds of billions of dollars to combat the problem.”