IRS Chief Danny Werfel Warns: ‘Reducing Our Funding Will Fuel Budget Deficit’

IRS Commissioner Danny Werfel cautioned lawmakers that cutting the budget of the tax-collecting agency would contribute to the increasing federal deficit and reverse many of its service improvements.

During a hearing before the House Ways and Means Committee on February 15th, Mr. Werfel defended the Internal Revenue Service’s budget increase. He warned that retracting these funds would weaken efforts to generate revenue for the U.S. government and bolster customer service support for taxpayers.

“For every $100 million taken from the IRS, the deficit grows by $600 million over 10 years,” he stated, adding that less IRS funding makes it easier for people to cheat on their taxes.

He outlined the IRS’s accomplishments with $100 million, citing 700 audits of high-income taxpayers, 200 audits of “complex partnerships,” 100 audits of large corporations, and 32,000 collection cases.

“And that’s just from the $100 million, so clearly it has an impact,” he added.

According to the Congressional Budget Office (CBO), the federal government is projected to face a budget deficit of $1.6 trillion for fiscal year 2024 and $1.8 trillion in FY 2025.

The CBO’s latest outlook for 2024-2034 indicates that Washington is on track to accumulate approximately $20 trillion in deficits over the next decade.

The non-partisan watchdog adjusted its 2024-2033 revenue projections downward by $3 billion, a reduction that largely accounted “for a provision of the FRA [Fiscal Responsibility Act] that rescinded funds provided to the Internal Revenue Service (IRS) for tax enforcement and related activities.”

As a component of the Inflation Reduction Act, the organization received an $80 billion boost over ten years. However, President Joe Biden reduced the funding by $20 billion as part of the debt ceiling agreement, also referred to as the FRA, negotiated with former House Speaker Kevin McCarthy.

The challenge for the IRS is that the clawbacks agreed to as part of a handshake deal between President Biden and Mr. McCarthy, were taken out of its regular appropriations budget, making its base budget “insufficient to run the daily train schedule,” Mr. Werfel noted.

“What that means is that we have to borrow from the modernization funding just to keep the lights on. And if we keep doing that, we won’t modernize,” he said.

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By Hunter Fielding
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