IRS Rescission Would Worsen Deficits
Rescinding $25 billion of IRS funding would result in the loss of $49 billion in revenue and increase deficits by $24 billion over ten years, according to the Congressional Budget Office (CBO).
Specifically, CBO scored an amendment to a “minibus” Fiscal Year (FY) 2024 appropriations bill currently under consideration in the Senate that would rescind slightly more than $25 billion of the $80 billion in funding provided to the IRS in the Inflation Reduction Act (IRA). The majority of those funds were meant to bolster the IRS’s enforcement efforts and ultimately reduce the annual “tax gap” – the difference between the amount the IRS is technically owed each year and the amount it actually collects – which the IRS recently estimated at $688 billion for tax year 2021.
Although the amendment would reduce spending by a bit more than $25 billion over a decade compared to the current baseline, it would also reduce revenue collection and thus increase deficits by $24 billion.
Rather than passing legislation to expand the tax gap, Congress should be focused on efforts to further improve tax compliance. Such efforts have a long history of bipartisan support as they offer a way to raise revenue without increasing taxes.