US Treasury Secretary Janet Yellen at a press conference with US Treasury Secretary Timothy Geithner at the White House on Tuesday.
President Joe Biden is calling for a crackdown on wealthy taxpayers who avoid taxes by hiding most of their income before taxes. President Biden has a plan to fund his $1.2 billion health care plan and give the Treasury more power to collect the government’s debt. Compliance with the tax code is one of many ways Biden is trying to increase tax revenue from households earning more than $400,000 a year, through the American Families Plan, which is funded by a $2.5 billion tax break for the top 1% of earners.
On Wednesday, Biden proposed giving the IRS $80 billion more powers to crack down on tax avoidance by the top 1% of income earners and other wealthy individuals.
The money raised would be part of a larger revenue generator to be used for a $4 trillion infrastructure jobs plan to help the economy recover from the effects of the COVID-19 shutdown.
President Joe Biden is boosting the Internal Revenue Service budget to help the agency crack down on wealthy individuals and powerful corporations trying to circumvent his proposed tax increases. The president plans to pay for his human infrastructure bill by increasing the income tax rate for the top 1% of earners from 37.5 cents today to 39.6 cents, and increasing the capital gains tax for those earning more than $1 million a year. Biden would also give the IRS an additional $80 billion in authority “to support the enforcement of the wealth tax on the wealthy that Biden has proposed as part of his $4 trillion infrastructure spending plan,” according to the New York Times.
Currently, income is often treated as capital gains subject to a lower tax rate, but not as income from other sources.
Biden also wants to end a tax break that allows real estate investors to defer tax if they trade real estate for profits of more than $500,000. Biden is calling for improved enforcement of the IRS and wants to send $80 billion to the Internal Revenue Service to fund better enforcement against high earners.
The administration believes that improved measures to combat tax evasion would raise $700 billion in revenue for the government, though outside experts are skeptical and the Congressional Budget Office, the recognized watchdog, is unlikely to forecast much of that revenue. This is where it comes in, as tax authorities will then be better equipped to carry out effective audits. However, 38 audits of large companies have not changed this, and they are necessary because the underfunded Internal Revenue Service is too easily outperformed.
In its simplest form, raising taxes on the rich by $1 trillion would allow them to find new loopholes in the tax code, such as corporate tax loopholes and tax avoidance schemes.
A properly funded IRS is an investment that pays off many times over, so the IRS’s appreciation may not be as fruitful as the president hopes.
Citing unnamed sources in Biden’s administration, the newspaper noted that authorities expect that improving the IRS’s enforcement and audit over 10 years could raise at least $700 billion.
IRS Commissioner Charles Rettig, who appeared before the Senate Finance Committee earlier this month, estimated that tax revenues that are not collected cost taxpayers more than $1.2 trillion annually. A study written by former Treasury Secretary Larry Summers concluded that the government could make up for lost revenue within a decade. Americans play by the rules and do not let us fund the important programs they support. It adds to the national debt that our children and grandchildren will inherit.
The Biden administration said its reforms would allow the IRS to collect $700 billion over 10 years. But former IRS Commissioner John Koskinen, who served under both President Obama and President Trump, told the New York Times that increasing spending at the Internal Revenue Service as quickly as possible would be a logistical challenge. Last year, the Congressional Budget Office found that Biden’s proposed 10-year tax reform plan would yield less than half of what the administration claims.
Tuesday brought a reminder that the Biden administration is interested in securing the resources that will match the will of those who will, according to the New York Times.
Tackling tax avoidance could raise more than $700 billion over ten years, and the $80 billion to boost enforcement could be recouped many times over, Biden’s people say. The New York Times reports that Biden has proposed giving the IRS an additional $80 billion for enforcement purposes and giving the agency more powers to help fight tax evasion and other forms of tax avoidance by the rich and powerful.
Of course, everyone should pay the taxes they owe, but it is all but certain that a strengthened IRS will create an even greater incentive for everyone to use the banks and financial institutions they use.
