The IRS Magic-Money Tree Bears Little Fruit

I’ve been arguing for a long time that we need tax simplification rather than a bigger budget for the IRS.

The clowns in Washington have a different perspective, however, and they approved the Biden-Harris plan to dramatically increase the IRS budget because that supposedly would generate hundreds of billions of dollars in additional tax revenue.

Well, they definitely achieved the first part. If you go to the supplemental materials section of the most-recent Biden-Harris budget and access the massive excel file for outlays, you can scroll down to get detailed numbers for the IRS budget.

As you can see, the IRS budget has skyrocketed in recent years (and I didn’t even count things such as IRS payments of so-called refundable tax credits since that’s merely redistribution being laundered through the tax code rather than operational funding).

But what about the second part? Has all this money led to a torrent of tax revenue.

The Treasury Department wants people to think the answer is yes. Here’s a headline from a September 6 press release.

Sounds impressive until you remember that folks on the left (and some naive/stupid folks on the right) claimed that super-sizing the IRS budget would produce much more.

In reality, the torrent turned out to be a trickle.

Dominic Pino of National Review summarizes how the goal posts have been moved.

After lots of hemming and hawing, Democrats finally got their huge boost in IRS funding in the so-called Inflation Reduction Act in August 2022. This $80 billion boost over ten years was supposed to help to “close the tax gap” by improving IRS enforcement to collect money taxpayers owed but were not paying. …The target was those evil rich guys sitting on piles of money. …At various stages in the Democrats’ quest for a bigger IRS, they were throwing around numbers as high as a $1 trillion to be collected from better enforcement. …the Treasury itself in May 2021 thought it could raise $700 billion over ten years from better tax enforcement. …By October 2021, the White House had revised its estimate to $400 billion over ten years. Still a ton of money. …Once the Inflation Reduction Act actually came into being, Democrats were banking on the IRS provisions raising $203.7 billion over ten years. …Then, in February 2024, the Biden administration cranked up the crazy again. The Treasury released a new study that claimed if the current IRS funding levels were made permanent, …the Inflation Reduction Act’s provisions could raise up to . . . wait for it . . . $851 billion over ten years. …There is not — and never was — any possible way that the IRS is going to raise several hundred billion dollars over ten years from better tax enforcement. This was magical thinking from Democrats. And they only wanted it to be true so that they could immediately spend the money raised on progressive policies. They got the spending; we get the debt.

You don’t know whether to laugh or cry at these results. Politicians lied through their teeth, but it worked.

And Dominic is right, The Biden-Harris Administration is pushing for further massive increases in IRS spending.

P.S. Actually, there’s nothing to laugh about from today’s column, so I’ll compensate by going to the archives for my collection of IRS humor, including the Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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Image credit: TravelingOtter | CC BY-SA 2.0.