Facing anticipated funding cuts under the incoming Trump administration, U.S. Treasury officials are urging Congress to release $20 billion allocated for IRS enforcement. The funds are currently stalled due to legislative language that has effectively frozen their use.
Treasury officials are pushing to resolve the funding freeze during upcoming budget negotiations, aiming to secure the injection of funds before President Joe Biden's term concludes, and Trump—who may seek to claw back the $20 billion—begins his presidency.
Fewer Audits Could Lead to $140 Billion Deficit
Treasury officials are warning of significant repercussions if the frozen IRS enforcement funds are effectively rescinded due to inaction. Treasury Deputy Secretary Wally Adeyemo cautioned on Tuesday that losing the $20 billion would increase the national deficit by $140 billion.
Adeyemo outlined the potential fallout during a call with reporters, noting that the IRS would conduct 6,000 fewer audits of wealthy individuals and 2,000 fewer audits of large corporations. Additionally, the agency would be forced to implement a hiring freeze, further straining its operational capacity.
"The IRS is going to potentially have to make dramatic decisions about stopping hiring and starting to budget for a world which they don't have $20 billion which will stop a lot of their progress," Adeyemo said. "If they don't get that $20 billion that is at risk they would run out of enforcement money at the current pace sometime in fiscal year 2025."
U.S. Has Reached $36 Trillion in Federal Debt
The U.S. federal debt has reached approximately $36 trillion. Post-pandemic inflation has significantly increased government borrowing costs, with projections indicating that debt service payments will soon surpass national security expenditures.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, echoed concerns about the broader consequences of cutting IRS funding. MacGuineas warned that reducing agency enforcement resources could significantly undermine efforts to curb the federal deficit, highlighting the critical role the IRS plays in revenue collection and fiscal responsibility.
"Given the fiscal situation we deeply hope there is no backsliding in the coming months and years with rescinding, diverting, repealing any of the revenue that is going effectively into the IRS to help with tax collection," MacGuineas said.
$20 Billion Redirected
The IRS initially received an $80 billion funding boost through the Democrats' Inflation Reduction Act to enhance its operations. However, much of that funding has since been clawed back.
A 2023 agreement between Republicans and the White House, aimed at addressing the debt ceiling and implementing budget cuts, resulted in $1.4 billion being rescinded from the agency. Additionally, $20 billion is set to be redirected over the next two years to support other non-defense programs.
This article includes reporting from The Associated Press
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