The addition of 87,000 new IRS agents has been celebrated by many as a way to capture billions in revenue to pay for the new bill on climate change and other programs. The claim is that increasing audits of people making over $400,000 will capture additional billions in revenue. That math has been challenged as wildly overestimated unless these new agents turn (as expected) to middle-income taxpayers. The respected Congressional Budget Office (CBO) has also directly contradicted claims made by President Biden and the sponsors on increasing the tax burden for middle-income families. What is interesting, however, are reports that the government believes that as much as $160 billion in Covid relief fraud exists and the government does not have the personnel or ability to recover most of those funds (or to prosecute most of the culprits). A fraction of those 87,000 new IRS agents would transform this effort, but documenting and prosecuting Covid relief fraud does not seem as much of a priority in Washington. Years ago, I debated one of the top advisers to Sen. Elizabeth Warren on her tax proposals, including a wealth tax. In the middle of the debate, the professor revealed that Warren and the Democrats wanted to radically increase the IRS to pursue wealthy Americans for more tax revenue through extensive audits. He spoke of adding billions in new money and thousands of new agents. It was another sweeping claim that the wealthy were not paying enough and that there was a virtually limitless amount of money to pay for new programs. They have now made good on that pledge with an $80 billion increase in the IRS budget — an increase that also must pay for itself in addition to covering the cost of new programs.
Many have noted that the numbers do not add up. While Treasury Secretary Janet Yellen sent a letter ordering that the new agents should not be used to audit people making less than 400k, it is hard to see where the required $204 billion will come from. Some estimates suggest that an increase of 30 times in such audits would still fall short of the $35.3 billion sought in 2031.
However, there is as much as $160 billion in alleged fraud of Covid checks. The government simply sent out billions with little review or confirmation during the pandemic. Now, the New York Times reports that a relatively small number of investigators is overwhelmed by the numbers and unlikely to pursue most of this money: “There are currently 500 people working on pandemic-fraud cases across the offices of 21 inspectors general, plus investigators from the F.B.I., the Secret Service, the Postal Inspection Service and the Internal Revenue Service.”
The problem is that pursuing such fraud is also an indictment of Congress and the executive agencies, which tossed aside controls in the rush to get money out the door during the pandemic. Moreover, much of the fraud is not being committed by the “wealthy” class — the favorite target of leaders like Warren. It is more difficult to prosecute these individuals and attempt to recoup property.
It is also inconsistent with the focus of these politicians on the most wealthy as tax cheats and scofflaws. They have been presented as a bottomless pit of money…
