The proposed debt ceiling agreement would cut IRS funding by $21.4 billion

An interim agreement to raise the debt ceiling provides for up to $21.4 billion in cuts to the IRS budget, cutting some of the nearly $80 billion in agency funding agreed to last August improve service, technology and taxpayer enforcement.

The bipartisan billThe resolution, released Sunday by House Speaker Kevin McCarthy and President Joe Biden, removes nearly $1.4 billion of funds allocated to the IRS. If changed, a separate deal would also reallocate $20 billion in IRS funds for fiscal years 2024 and 2025, it said White House.

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Because the original $80 billion in IRS funding was earmarked for a 10-year period, White House officials said Sunday they don’t expect the budget cuts to fundamentally change the agency’s short-term plans. However, in the later years of the original schedule, the IRS may need to request more funds, they said.

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According to Alex Muresianu, a policy analyst at the Tax Foundation, if implemented eventually, the IRS budget cuts would result in the agency’s additional funds being consumed more quickly.

“But the IRS is still showing a very large increase in funds compared to baseline,” he said. “So it’s not like we’re turning back the clock.”

The $80 billion IRS funding has been a hot political topic since it took effect, and the money’s cancellation was a topic during the 2022 midterm elections in the fall.

Republicans in the House of Representatives voted to cut IRS funding in January after Speaker Kevin McCarthy vowed to withdraw funds approved by Congress. But the measure was stopped without support from the Democratic-controlled Senate or the White House.

The IRS released its plan for the $80 billion funding in April. The aim is to strengthen service to the taxpayer, improve outdated technology and reduce the budget deficit by closing the tax gap, with a focus on wealthy families and businesses.

White House officials on Sunday repeated Biden’s commitment to cracking down on tax evasion among top earners.

Meanwhile, the debt ceiling bill met opposition from Republican members of the House Committee on Tuesday. According to revised estimates by the US Treasury Department, the bill must pass a Democratic majority in the Republican-controlled House and Senate before June 5. This is the earliest the US could run out of money.

The House of Representatives is expected to vote on the bill on Wednesday evening.