Kevin McCarthy

U.S. Speaker of the House Rep. Kevin McCarthy (R-Calif.) speaks to members of the press during a news conference at the U.S. Capitol on March 30, 2023 in Washington, D.C.

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Progressives Say IRS Cuts Should Be 'Off the Table' as GOP Reneges on Debt Ceiling Deal

With House Republicans pledging to limit new spending on a range of programs, Democrats are "no longer obliged to move forward with the IRS cuts" in the handshake deal, said more than a dozen groups.

More than a dozen economic justice groups on Friday called on the U.S. Senate Appropriations Committee to move forward with fully funding the Internal Revenue Service, arguing that Republican actions have nullified a debt ceiling deal struck by the Biden White House and GOP leaders.

Under the terms of the handshake agreement, the nation's borrowing limit was suspended for two years in exchange for a two-year limit on non-military spending—rescinding Covid-19 relief funds; clawing back more than $20 billion in IRS funding that was a signature element of the Democrats' climate and healthcare law, the Inflation Reduction Act (IRA); and enforcing new work requirements for recipients of nutritional and economic aid.

Soon after the deal was reached, said groups including Groundwork Action, Americans for Tax Fairness, and the Institute on Taxation and Economic Policy (ITEP), House Speaker Kevin McCarthy (R-Calif.) and other powerful Republicans made clear they have no intention of sticking to the funding cuts that were agreed upon.

As Common Dreams reported in June, less than two weeks after the debt ceiling deal had been reached, House Appropriations Committee Chair Kay Granger (R-Texas) said the spending levels in the agreement were "a ceiling, not a floor" for 2024 spending and that Republicans are free to limit new spending in appropriations bills for the coming year.

"To be clear, Republican demands for IRS cuts were never sensible. The cuts will cost the government more than they will save and will make tax filing more complicated for middle-class Americans."

"In doing so, House Republicans are underfunding the very programs the agreed-upon IRS cuts are designed to protect," said the groups in their letter Friday. "Thus, your committee is no longer obliged to move forward with the IRS cuts in its appropriations and should instead fully fund the IRS at the levels President Biden requested in his FY2024 budget."

As the Senate committee prepares to mark up appropriations legislation, said the organizations, it should "include all of the funding for the IRS requested by President Biden in his FY2024 budget, amounting to $14.1 billion in annual discretionary appropriations for the IRS, and to preserve the $79.4 billion in long-term funding included in the Inflation Reduction Act."

"If Republicans have decided that the deal is off, then further IRS cuts should be completely off the table," ITEP federal policy analyst Joe Hughes told Common Dreams on Friday.

IRS funding aimed at cracking down on wealthy Americans who cost the federal government—and working families—tens of billions of dollars annually by evading taxes was a key provision of the IRA last year. After becoming House Speaker in January, McCarthy made clear his intention of cutting the funding.

Funding for the tax agency is "necessary to support a fair tax system, crack down on wealthy tax cheats, guarantee the highest quality of taxpayer services for all Americans, and ensure that the IRS can build an effective system that would empower taxpayers to file their taxes for free," said the groups.

As Common Dreams reported in June, the GOP's proposed cuts to the IRS would cost the federal government in $40 billion in lost revenue.

"To be clear, Republican demands for IRS cuts were never sensible," Hughes said. "The cuts will cost the government more than they will save and will make tax filing more complicated for middle-class Americans. Meanwhile, the top 1% and big multinational corporations will use their armies of accountants to cheat the system out of taxes that they legally owe."

While working to protect the wealthiest Americans from tax enforcement, the Republicans are also intent on scrapping an IRA provision which required the IRS to develop a tax filing system that would be free for all Americans—saving them hundreds of dollars per year in fees they currently pay to private companies like H&R Block and TaxSlayer to file their taxes.

A seven-month congressional investigation found this week that those companies send the private data of clients to tech giants like Meta and Google, constituting a "shocking breach" of privacy, according to Democratic lawmakers.

But the Republican-controlled House Appropriations Committee included a rider in its Financial Services and General Government (FSGG) legislation that would block the IRS from creating a simplified, free system for taxpayers.

"We strongly urge you to fully fund the IRS so that it can enforce tax laws against wealthy tax cheats and deliver 21st century customer services and oppose any efforts to incorporate harmful riders into the appropriations process," the groups told the Senate committee. "We have an opportunity to provide a free and fair option to millions of tax filers in America, making the tax system simpler and more equitable. Let's not miss this opportunity."

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