The Internal Revenue Service (IRS) is anticipating a significant increase in tax collections, surpassing previous estimates, thanks to enhanced enforcement enabled by the Democrats’ Inflation Reduction Act.
According to recent analysis released jointly by the Treasury Department and the IRS, tax revenues are projected to surge by up to $561 billion from 2024 to 2034, a substantial boost facilitated by the funding allocated under the Act.
IRS Funding Forecasts to Potential Revenues
The Congressional Budget Office had forecasted that the infusion of funds from the Inflation Reduction Act would yield an additional $180.4 billion in revenues from 2022 to 2031.
However, the latest IRS assessment indicates a potentially more significant impact, with estimated revenues possibly reaching $851 billion from 2024 to 2034 if the Act’s funding is reinstated, sustained, and diversified.
The Biden administration is leveraging this analysis to underscore the benefits of its economic policies, particularly President Joe Biden’s proposed investments in IRS revitalization, as part of his reelection campaign.
National Economic Adviser Lael Brainard emphasized the role of these investments in narrowing the deficit by ensuring that wealthy individuals and large corporations fulfill their tax obligations.
Critics of the administration’s approach, particularly Congressional Republicans, have opposed increases in IRS funding. They argue that such funding expansions prioritize tax enforcement over deficit reduction.
Despite the initial $80 billion funding boost provided by the Inflation Reduction Act, subsequent actions by House Republicans have slashed IRS funding, creating challenges for the agency.
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IRS Boosts Tax Enforcement
The IRS has been actively demonstrating its commitment to utilizing the available resources effectively. Recent initiatives include improvements in customer service and successful efforts to recoup back taxes from high-income tax evaders.
Additionally, the agency aims to address the widening tax gap, which currently exceeds $600 billion annually, by ramping up enforcement efforts, particularly targeting millionaires and large corporations.
Treasury officials emphasize that the Inflation Reduction Act’s funding infusion has enabled the IRS to reverse the declining trend in audit rates for wealthy individuals and large corporations.
As the agency continues to navigate funding challenges, its efforts to bolster tax enforcement remain crucial in ensuring fairness and integrity in the tax system.
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