WASHINGTON – President Biden is expected to propose over the next 10 years to grant the Internal Revenue Service an additional $ 80 billion and more powers to tackle tax evasion by high earners and large corporations, according to two people familiar with the plan.
The extra money and enforcement powers will come with new disclosure requirements for individuals who own businesses that are not organized as corporations and other wealthy individuals who may be hiding income from the government.
The Biden administration will present these efforts – along with the new taxes it is proposing for the business and wealthy – as a way to balance the tax playing field between typical American workers and very high earners who are making sophisticated efforts to minimize or avoid taxes to balance. The proposed $ 80 billion funding would be a two-thirds increase over the agency’s total funding levels over the past decade.
The administration estimates that the I.R.S. Another $ 80 billion in a decade could generate at least $ 780 billion in new tax revenue, which translates into net income of at least $ 700 billion. Mr. Biden plans to use money raised through efforts to cover the cost of his American Families Plan, which he will detail before speaking to a joint congressional session on Wednesday. It will be the largest single source of income for the plan.
This plan, following its $ 2.3 trillion infrastructure package, is expected to cost at least $ 1.5 trillion and include the universal front yard, federal paid vacation program, efforts to make childcare more affordable, free community college for all and tax credits for the fight embrace poverty.
The government also plans to pay for the plan by increasing the highest marginal tax rate for wealthy Americans from 37 percent to 39.6 percent and increasing capital gains tax rates for those who make more than $ 1 million a year, which would add up to hundreds of billions of dollars Dollar. According to one person familiar with the proposal, Mr. Biden will also seek to increase the tax rate on income received through stock dividends for individuals who earn more than $ 1 million a year.
The government is expected to portray the $ 780 billion it plans to raise through increased enforcement as conservative. This figure only includes money raised directly through improved tax audits and additional reporting requirements, and does not include additional income from individuals or businesses who choose to pay more taxes after avoiding them.
Many economists and tax professionals welcomed the proposal, which would help reverse years of declining enforcement actions against businesses and the rich in the agency.
“The plan is good news for honest applicants and businesses, the budget and the rule of law,” said Chye-Ching Huang, general manager of the Tax Law Center at N.Y.U. Law. “If we prevent tax evaders from gaining an unfair advantage, honest businesses can compete and thrive.”
Previous administrations have long talked about bridging the so-called tax gap – the amount of money taxpayers owe but not recovered every year. That month, I.R.S. head Charles Rettig told a Senate committee that the agency lacked the resources to catch tax fraud that cost the government up to $ 1 trillion a year.
The erosion of resources on the I.R.S. has been detailed in a Report of the Budget Office of the Congress last year in which the work of the agency was examined from 2010 to 2018. During this period, the I.R.S. by 20 percent and the staff by 22 percent. Enforcement funding fell by almost a third.
With less money and less staff, the I.R.S. was forced to become more negligent in enforcing tax laws. The audits of the individual tax returns went according to C.B.O. by 46 percent and corporate tax filing audits by 37 percent.
Mr Biden wants to change that. His economics team includes Natasha Sarin, an economist from the University of Pennsylvania. his research with the economist Lawrence H. Summers of Harvard University suggests the United States could raise up to $ 1.1 trillion in a decade through increased tax enforcement.
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Mr. Summers praised Mr. Biden’s anticipated plan in an email late Monday. “This is broadly the right approach,” he said. “Deterioration in I.R.S. enforcement efforts and information gathering are scandalous. The Biden Plan would make the American tax system fairer, more efficient and, I am confident, generate more revenue than the now forecast official Scorekeepers – probably a trillion over 10 years.”
Mr Biden’s efforts would incorporate some of the suggestions made by Mrs Sarin and Mr Summers, including heavy investments in information technology improvements to help the agency better target its audits of high earners and companies.
They would also provide the agency with a dedicated stream of funding so that officials can steadily expand their enforcement practices without fear of budget cuts and signal to potential tax evaders that the agency’s efforts are not going to wane anytime soon. Mr Biden would also add new requirements for people who own so-called pass-through companies or keep their assets in opaque structures, reminiscent of a program set up under President Barack Obama to help the agency better possible tax evasion by Americans with foreign interests to pursue.
Fred T. Goldberg Jr., an I.R.S. Commissioner under President George H.W. Bush called Mr. Biden’s plan “transformative” to combine these efforts.
“Reporting information related to restoring enforcement efforts is key to improving compliance,” Goldberg said in an email. “Audits alone will never be enough.”
He added, “None of this happens overnight. A decade of stable funding is required to recruit and train talent and build on the technology required – not just for compliance purposes, but to ensure the quality of service that the vast majority of compliant taxpayers expect and deserve. “
Some conservative tax activists are opposed to additional spending with the agency. Grover Norquist, the president of Americans for Tax Reform, said in an interview that additional enforcement money could increase the number of politically motivated audits while weighing on small business owners, with no guarantee of a sharp increase in sales.
“Nothing says these people are going to raise money,” he said. “The I.R.S. has long been heavily politicized. They did nothing to fix the problem.”
Tax experts tend to agree that strengthening the I.R.S. will more than pay off, but it’s not clear how much is really needed when many of the agency’s functions can be automated and more tax returns filed electronically.
The C.B.O. Last year estimates suggest an additional $ 40 billion over 10 years would add $ 103 billion to government revenues. Administrative officials are confident that the real amount is much higher.
John Koskinen, who worked as I.R.S. The commissioner under President Barack Obama and President Donald J. Trump said he believed the $ 80 billion proposed by the Biden administration could be too much. The suggestion came as a surprise when it came from someone who loudly complained that the agency was starved when he was in charge.
“I’m not sure you can use that much money efficiently,” Koskinen said in an interview. “That’s a lot of money.”
Mr Koskinen said he thought an additional $ 25 billion would add over a decade to the I.R.S. The budget has been rolled back to 2010 levels, allowing law enforcement officers lost due to wear and tear to be recruited and the agency’s customer service functions to be revamped.