The $79 billion attempt to find $203 billion more

Steven M. worked for the Internal Revenue Service during tax season as a taxpayer services call representative. From a cubicle in his 30-person office in Newark, N.J., he answered tax code–related inquiries and the occasional oddball question like, “Can I claim my dog as a dependent on my taxes?” When a particularly complicated question surfaced, Steven would get on the phone with an IRS agent to help untangle the issue, but that was a rare occurrence.

To him, the idea of hiring an additional 87,000 employees for the IRS, an act that would roughly double the bureau’s workforce, sounds outlandish. Steven could face legal action for discussing his former workplace, so WORLD agreed to withhold his last name.

“It’s insane. The last thing you need to do is put more money into IRS agents,” he said. “They’re going after everybody.”

On Tuesday, President Joe Biden signed the Inflation Reduction Act, a portion of which funds additional IRS resources for the next 10 years. GOP House Minority Leader Kevin McCarthy echoed a concern of many conservatives on Twitter, saying, “Democrats’ new army of 87,000 IRS agents will be coming for you.” While the fears of a new army of IRS agents are unlikely to come true, so are the hopes that the agency can generate hundreds of billions of dollars in new government revenue.

Among an array of other policy initiatives, the act gives the IRS funding it has requested for years. As the bill made its way through Congress, hardly anyone batted an eye at those appropriations. But that quickly changed when reports emerged that the funding—almost $80 billion administered over 10 years—might enable the hiring of 87,000 new IRS employees and increase auditing scrutiny on Americans making $400,000 or more in a year.

Steven’s largest concern is middle-class business owners who may not have been careful enough in starting their enterprises.

“A lot of people running their business don’t have good records and throw their receipts in a shoebox, you know? So now [the IRS] is going to go after them and ask, ‘you had $50,000 in expenses, can you show us those records?’ Those guys are going to be in trouble.”

The legislation makes $79.62 billion available to the agency until the year 2031, funding taxpayer services, enforcement, operations support, business systems modernization, the development of a mobile-friendly e-file system, as well as other administrative needs. But the text doesn’t actually mention 87,000 new agents. That figure comes from an entirely separate report.

In May 2021, the Treasury Department released the “American Families Plan Tax Compliance Agenda,” making the argument that the IRS did not have the tools or staff to keep up. As of 2021, the IRS reported $13.7 billion in expenses and 78,000 employees on staff—a 12.9 percent decrease since 2012 and the fewest auditors since World War II.

Mark Stone, a former part-time employee for the IRS, agrees with the report’s assessment. He said the IRS is outmatched when it comes to competing against deep pockets.

“The IRS has totally been gutted,” Stone said. “They have no one on staff who can audit the top 1 percent. The problem is that corporations and rich people have accountants, tax lawyers, auditors, going through their books and making sure they are correct.”

This is where the 87,000-strong expansion comes in. The 2021 Treasury report presented a range of possible additions to the IRS workforce over the next 10 years. At a minimum, the report suggests a 5,000-person increase to the existing workforce by the end of 2022. But it also allows for as many as 86,852 full-time workers by 2031. That doesn’t mean that the IRS intends to hire that many employees—but if it decided to, it’s been penciled into the budget.

That 2021 report petitioned for $80 billion in funds. Now that the Inflation Reduction Act has granted precisely that amount, observers presumed the IRS would follow through on its projected 2031 numbers. For policy researchers like Rachel Greszler, a senior research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, the problem isn’t so much the number of people the IRS could hire, but rather the target revenue they hope to find.

According to projections from the Congressional Budget Office, the IRS believes it can raise an additional $203.71 billion in revenue by 2031 via the additional audits. But IRS Commissioner Charles Retting confirmed in a letter to Congress earlier this month that it wouldn’t increase audits on Americans making less than $400,000 in a year.

Greszler says the math is optimistic at best and deceptive at worst. Greszler took the number of audits performed in 2010—a rate much higher than the ones performed in 2021—and applied them to today’s Americans earning $400,000 or more. Her research indicates that would only cover 28 percent of the projected revenue.

“I just don’t see them being able to generate $203 billion in new revenue if they’re just going after people making more than $400,000. The money just doesn’t seem to be there. And that’s based on their own reports about how much comes in from additional audits,” Greszler told WORLD.

It’s a tricky number to calculate. Even the 2021 American Families Plan Tax Compliance Agenda acknowledges the difficulty in calculating how much money is currently evading tax compliance. But with the U.S. counting on raising those funds, Greszler estimates the IRS will have to ramp up audits on people below their target or else run the risk of missing their estimates.

An IRS spokesperson declined WORLD’s request for comment.