McCarthy’s sales pitch for his deal: Less money for law enforcement

The way the IRS is constructed, it is destined to be unpopular.

At its most abstracted, it is about law enforcement, getting people to comply with federal rules. But, unlike a local police department, people don’t see an upside. We accept the power of local police in part because we — well, many of us — feel as though we’re unlikely to be targeted by them. What’s more, we recognize that this power results in something that benefits us directly: reduction of crime, or the detention of criminals.

The IRS, though, doesn’t offer a similar benefit. It does indirectly, of course; it is largely responsible for ensuring that everything else in government is possible. But Americans often don’t look at the IRS and draw the line between that agency’s work and, say, the existence of national parks. Plus, of course, police officers don’t generally shake you down for a portion of each paycheck, something that tends to stir up some feelings of resentment.

And so it is that the IRS is the least popular government agency on net. Pew Research Center polling released in March shows that 42 percent of Americans view the agency positively and 51 percent view it negatively for a minus-nine net favorability. That’s seven points worse than the next to last agency in popularity, the Department of Education.

A key reason the IRS’s net favorability is so low is that Republicans are twice as likely to view it negatively as positively. There are three agencies that at least 60 percent of Republicans view unfavorably: the Department of Education, the Centers for Disease Control and Prevention, and the IRS. The reason for the unpopularity of each is probably readily understood.

So, yes, the National Park Service and NASA are viewed positively by Democrats and Republicans alike, but the agency that ensures they have the money to operate is viewed negatively. America’s Ticketmaster.

Those are all structural challenges for the IRS. There are other problems, too, of course. For one thing, it seems capricious, in part because the process for paying taxes is intentionally complicated, partly because that process results in byzantine boundaries that are easy to cross — and in part because we only ever hear our friends’ or acquaintances’ explanations for why the IRS made their lives harder.

Given all of this, it was easy to predict the response when the Democratic Congress passed legislation last year that increased funding for the agency, money aimed at improving customer service (to use a bit of rather inaccurate vernacular) and tracking down tax cheats. In short order, the idea that the IRS would be hiring 87,000 new agents to audit Americans became a central element of Republican political rhetoric.

It was never accurate. The increased funding would add a bit fewer than 87,000 employees in general over the course of the next decade, not just enforcement agents. The Biden administration also argued, convincingly, that it hoped only to increase review of filings from wealthier Americans, given that — thanks to Republican-backed cuts to the IRS budget — the ratio between the number of high-income filers and the number of enforcement agents has plunged over the past two decades. (The graph below, created in August, includes a period in the early 2000s when data on enforcement employment was more broadly defined.)

The increased spending on enforcement was expected to more than pay for itself through increased compliance with the law.

But what Republican is going to believe that? The right’s inherent skepticism of government power combined with its increasing anger at the left and Democratic political leaders generates an enormous political opportunity to cast increased IRS funding as part of a nefarious plot to make non-wealthy Americans’ lives harder. This has driven a “defund the tax police” movement, a funhouse reflection of calls to reshape how police departments work, given evidence of systemic bias. Since average Republicans are more likely to think (however justifiably) the IRS will come after them than they are that their local police force will, the idea that the IRS needs to be limited and controlled has more potency.

When Republicans took control of the House in January, the first legislation that was brought to the floor for a vote aimed to claw back the funding increase given to the IRS last year. It would not become law, given the Democratic Senate and Democratic president, but it was a reflection of how important this issue had become on the right.

Then the country reached the debt ceiling, and the GOP had new leverage.

Over the weekend, House Speaker Kevin McCarthy (R-Calif.) and President Biden announced a deal that would increase the amount of debt the government is allowed to hold. Lengthy talks resulted in commitments from the administration limiting spending increases and some changes to how money is spent. Among them, McCarthy boasted, was a reversal of some of the funding allocated to the IRS.

“Do you know how much they’re going to spend this year for IRS agents? $1.9 billion,” McCarthy said in an interview on Fox News on Sunday. “So we repealed every single dollar they were going to use for IRS agents. So they hired zero.”

The federal fiscal year is already two-thirds over. A report from the IRS released last month indicated that the agency planned to spend about $372 million this fiscal year (which ends on Sept. 30) hiring about 1,500 enforcement agents and $1.4 billion next year to bring the total number of new agents to about 7,200. The White House argued that the deal reached with McCarthy was unlikely to affect the expansion plans.

The Washington Post’s Catherine Rampell, meanwhile, documented the ways in which the increased funding had already improved the agency’s work and Americans’ interactions with the IRS: shorter call times, clearing a backlog of returns, new software that speeds the processing of returns. Rampell also notes that over the past decade, the percentage of the largest U.S. companies being audited fell from 93 percent to 38 percent. The odds that this didn’t affect the amount of revenue the government took in are basically zero.

“Paring back the expansion is aimed at giving McCarthy a victory he can use to sell the deal to House conservatives,” The Post’s Jeff Stein and Tobi Raji wrote in their assessment of the debt ceiling deal. But in part because the rhetoric on IRS enforcement got so overheated last year, not everyone is convinced.

It remains to be seen whether the agreement will pass the House, although, given the joint endorsement of Biden and McCarthy, passage seems likely.

But it’s useful to put a fine point on what unfolded here. The right’s antipathy to the IRS, a not-uncommon sentiment, curdled last year into hostility, with conservative media and right-wing pundits jockeying to present the most dire assessments of increased IRS funding. That pushed Republican leaders into having to constantly prioritize defunding the IRS and its renewed effort to ensure that wealthy Americans are complying with tax law. That many of those wealthy Americans are Republicans and Republican donors (and, at times, funders of right-wing punditry) probably plays some role here.

The result is that House Republicans threatened to allow the government to default on its debt in part to let rich people interested in cheating on their taxes get away with it.