House Democrats are proposing two pieces of legislation that would increase tax audits of high earners and corporations and provide more funding for the Internal Revenue Service.
Rep. Peter DeFazio, D-Oregon, reintroduced the
Rep. Ro Khanna, D-California, introduced a separate bill Wednesday, the
The bills come at a time when Democrats are in control of not only the House, but also the Senate, albeit by narrow margins, in addition to the White House. The Biden administration is focusing first on urgent priorities like passing its $1.9 trillion American Rescue Plan for providing Economic Impact Payments of $1,400 along with increased Child Tax Credits of up to $3,600, along with funding for state and local governments and to help with vaccine distribution. However, lawmakers are already introducing their own tax legislation that they hope to advance when Congress ultimately takes up the tax policies of the new administration, either later this year or next year. President Biden and many of his fellow Democrats campaigned last year on rolling back some of the corporate tax cuts from the 2017 tax overhaul to pay for policy priorities like combating climate change and income inequality.
“It’s not enough that our Tax Code gives billionaires and giant corporations huge tax handouts — the agency responsible for collecting the taxes from these top earners is woefully underfunded and ill-equipped to do so,” DeFazio said in a statement. “The result is working families subsidize the tax bill for the wealthiest among us and multibillion-dollar corporations who aren’t paying their fair share.”
The bill aims to make significant investments in the IRS to enable the agency to collect from top earners and set minimum audit levels to ensure the wealthy pay what they owe. DeFazio noted that two former IRS commissioners, Fred Goldberg and Charles Rossotti, who served during Democratic and Republican administrations, agree with the idea.
Khanna’s bill would provide $100 billion in extra funding to the IRS over 10 years to help it generate an estimated $1.2 trillion in revenue. Of that funding amount, $70 billion would go to enforcement, $20 billion toward taxpayer services, and $10 billion toward information technology and operations support. It would require IRS audits of the wealthiest corporations and individuals.
“We know our tax system is broken, and it’s long past time we start fixing it,” Khanna said in a statement.
Under his bill, individuals whose taxable income is above $400,000 (in the top 3 percent of adjusted gross income) and who have received additional income from sources not previously disclosed to the IRS would need to disclose their income on a Form 1099, and then prepare an accurate tax return that discloses all of their income, as other taxpayers use 1099s and W-2s. The IRS would be required to submit regular reports to Congress on its progress to recruit and retain auditors with the skills to audit high-income earners and report on revenue losses, grouped by income levels and from offshore tax evasion.
The bill would also require IRS audits of the wealthiest corporations and individuals, including 95 percent of corporations with more than $20 billion in assets, 50 percent of individual tax returns with income over $10 million per year, 20 percent of individual tax returns with income between $1 million and $5 million per year, and 33 percent of individual tax returns with income between $5 million and $10 million a year. Millionaires who falsify their tax returns would pay an additional penalty of 20 to 40 percent of the underpayment depending on their income under the bill.
