IRS begins a security review following heated criticism of its new funding. IRS Commissioner Charles Rettig announced last week that the agency will conduct risk assessments in each of its 600 facilities to determine whether increased security is necessary. This is the first such review since the 1995 bombing of the Alfred P. Murrah building in Oklahoma City. IRS staffers increasingly are concerned about their safety following unfounded claims that the agency will use $80 billion in funding approved as part of the Inflation Reduction Act to hire tens of thousands of armed agents.
The Administration pushes back. The Biden Administration is aggressively pushing back against GOP claims that new IRS funding will be used to hire “87,000 armed agents.” A Treasury official tells The Wall Street Journal the first hiring priority will be for taxpayer services, though funding for that function accounts for less than 5 percent of the new money. Commissioner Charles Rettig wrote an op-ed for Yahoo! Finance attempting to knock down some GOP allegations.
CBO reduces its revenue estimate for IRS funding. The Congressional Budget Office projects the added IRS funding will generate about $180 billion in new revenue over the next decade, about $23 billion less than it estimated a few weeks ago. The reduction was due to a last-minute change in the bill that will make it harder for the IRS to hire and because Treasury wants IRS to limit audits on those making $400,000 or less. CBO assumes that a very small number of additional taxpayers making less than that threshold would be audited.
Who will win the political battle over framing the Inflation Reduction Act? TPC’s Howard Gleckman explores the messaging of both Democrats and Republicans. Is the new law all about lowering inflation, reducing health care costs, shrinking the budget deficit, saving the environment, and raising taxes on big corporations, as Democrats claim? Or is the law about funding IRS harassment of honest families, as Republicans claim? Howard concludes that “with so many disparate messages, Democrats risk watering down them all. Republicans are focusing all their criticism on just one target: the IRS.”
Student debt forgiveness will be exempt from federal income tax. TPC’s John Buhl writes about President Biden’s $240 billion plan to forgive $10,000 of student loan debt, tax free, if you earn less than $125,000 (or $250,000 for couples). John explains why the federal government will lose $34 billion in income tax revenue as a result. Meanwhile, a Tax Foundation analysis finds that some of those whose debt is forgiven may owe higher state income tax, because their state tax codes do not conform fully with the federal code.
The Inflation Reduction Act’s corporate book income tax is just beginning to pressure financial and tax accounting rules. TPC’s Gene Steuerle says that the new tax reduces some tax distortions but raises other challenges. For future reform efforts, Gene argues that financial and tax accounting could treat tax credits—which are not hard to value and generally don’t affect the measure of corporate income—as outlays rather than reductions in tax.
Congress is not in session. The Daily Deduction will resume its regular schedule when Congress returns.
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