Who wants to be an Internal Revenue Service enforcement agent? Turns out, almost nobody.
President Biden’s plan to boost the government’s revenue over the next decade by adding 87,000 IRS agents is on a collision course with the hard reality that they can’t even recruit enough new workers now to meet the existing staff levels, according to recent studies.
That could seriously imperil Mr. Biden’s goal of using the IRS to generate $124 billion in new government revenue through 2031 to pay for portions of the $740 billion climate, tax, and health bill he signed into law last week.
The bill includes $80 billion in IRS funding which will empower the agency to hire more auditors, who will chase down tax cheats thus boosting the government’s revenue.
The Biden administration has pitched the plan as a sure-fire moneymaker for the federal government. But there’s one snag: The IRS is already struggling to attract and retain talent.
“This plan is going to be extremely difficult to achieve. The IRS is competing with lots of employers out there and not everyone wants to be the bad tax guy or spend hours of the day poring over boring IRS documents,” said Rachel Greszler, a senior research fellow on budget and entitlements at the Heritage Foundation.
IRS Commissioner Chuck Rettig has urged patience.
After Mr. Biden signed his massive spending bill, Mr. Rettig said in a statement that “changes will not be immediate” and the hiring spree “will take time.”
An agency spokesperson contacted by The Washington Times had no comment beyond referring back to Mr. Rettig’s statement.
The IRS currently has roughly 79,000 employees so the funding could more than double its enforcement capacity. However, it has already lost more than 20,000 full-time employees, or about 20% of its workforce, over the past decade, according to the agency’s own numbers.
That deficit also is expected to increase soon, because an estimated 52,000 of the IRS’ 83,000 employees, or 63%, eligible to retire or resign in the next six years.
The agency also loses employees faster than other federal agencies, having an average annual attrition rate of 7.3% compared to 5.8% for all other federal agencies, according to the IRS Strategic Plan for Fiscal Years 2022-2026.
A Government Accountability Office report in February found the IRS failed to meet its fiscal 2021 hiring goals for its critical front-line workers who process returns. The report said that those employees had an attrition rate of 17% last year, more than double the average for the total IRS workforce, which caused audit rates to plunge.
Among revenue agents and revenue officers, the workers who handle the most complicated audits, 40% of those highly-skilled workers have left the agency in the past decade.
Without enough processing employees, the IRS had a backlog of 9.7 million unprocessed individual 2021 returns. It is expected to catch up to the backlog by the end of this year.
That means for the IRS to achieve Mr. Biden’s hiring ambition, the agency would have to grow at an annual rate of 15% over the next decade, even though its overall workforce shrunk by roughly 8% last year.
“It’s going to be a real struggle, if not impossible, for the IRS to get employees in place, and whether or not they stick around,” Ms. Greszler said.
Mr. Rettig has acknowledged his agency’s difficulties in hiring new employees.
The Biden administration in March sought to help agency staff up by granting it Direct Hiring Authority, a special designation that the Office of Personnel Management can give federal agencies to speed up hiring when there is a severe shortage of employees.
That means the agency can bring people on board within 45 days, compared to six-to-eight months without that authority. However, private sector employees can bring people on board in days instead of weeks in the highly-competitive labor market.
At the time, the agency had been requesting Direct Hiring Authority for over two years.
However, the agency is still stuck paying below-market wages both to high-level accountants and lawyers and to workers who open the mail and process incoming tax returns.
Private sector employees advertised 10.7 million jobs at the end of June, the Labor Department reported this month. Although it’s a decline in the number of openings since April, it is still among the highest level in decades.
Coupled with a 3.5% unemployment rate, there are nearly two job openings for every unemployed person.
Front-line IRS employees who process returns are being paid about $15 an hour, less than such big retailers as Amazon, Walmart, and Target, who are paying more than $20 an hour for the same labor pool.
“The difference between $15 and $20 is whether or not they are going to have a lunch or a dinner, and what it’s going to be. So we need assistance,” Mr. Rettig said in testimony before Congress earlier this year.
Democrats fought to include measures in Mr. Biden’s bill that would let the IRS make hires on an expedited basis at higher salaries, but Senate Republicans stripped the provisions on procedural grounds.
He said if the agency weren’t struggling to fill positions, it could make a “sizeable dent” in tracking down tax scofflaws, which is estimated to cost the government more than $1 trillion per year.
Mr. Rettig, who was appointed by former President Trump, told lawmakers on the House Ways and Means Committee that the IRS trying to lure employees through incentives like tuition-reimbursement programs and child-care credits.
It’s also unclear how much of the IRS’s newfound windfall will be eaten by operating costs.
According to the agency’s date, in 1987, when the IRS’s workforce exceeded 100,000, its expenditures were $4.4 billion, or $10.5 billion in 2021 money. Last year, with a smaller workforce of roughly 79,000 employees, the agency’s expenditures exceeded $12.4 billion.
The IRS also will first have to increase its human-resources staff to hire thousands of employees over the next decade. In addition, it costs an agency six-to-nine months of an employee’s salary to replace them and with the average IRS employee earning $75,000, that money could add up fast.
The IRS has not yet outlined specific plans for how the funds will be used to hire employees over the next decade and what roles those employees can fill. While more than $80 billion is earmarked for enforcement purposes, the agency has signaled that some of the funds will be used to improve customer service and information technology.
That lack of clarity has opened the door for criticism from Republicans, who are depicting the agency as armed thugs kicking down Americans’ doors to take their income.
Appearing on Fox News last week, Sen. Charles E. Grassley, Iowa Republican, compared IRS agents to a strike force targeting business owners.
“Are they going to have a strike force that goes in with [AR-15s] already loaded ready to shoot some small business person in Iowa with these?” Mr. Grassley said, warning the IRS will target “middle class and small business people.”
Mr. Grassley was alluding to an online IRS job ad that listed under the “major duties” of applicants, “being able to carry a firearm and be willing to use deadly force if necessary.”
Still, Democrats say such statements are ridiculous.
Sen Ron Wyden, Oregon Democrat, dismissed Mr. Grassley’s claims as “incendiary conspiracy theories.”
“It’s unbelievable that we even need to say this, but there are not going to be 87,000 armed IRS agents going door-to-door with assault weapons,” Mr. Wyden said.
Still, Republicans say more employees will ultimately mean more audits for average Americans. Democrats, including Treasury Secretary Janet Yellen, dispute that claim. In a letter, Ms. Yellen pledged that “audit rates will not rise relative to recent years for households making under $400,000.”
It’s unclear what “relative to recent years” means for taxpayers, though.
Audit rates have dropped in recent years because of the COVID-19 pandemic and cuts to IRS funding. The administration probably won’t want to stick to those scaled-back numbers as its baseline.
As for whom the audits would target, the Biden administration has touted that 0.1% of Americans making between $75,000 and $100,000 were audited in 2019.
However, the Joint Committee on Taxation — Congress’ tax scorekeeper — concluded that 78% to 90% of under-reported tax income would come from Americans earning less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000.
While campaigning for president in 2020, Mr. Biden vowed that he would not raise taxes on any American paying under $400,000 a year.
Senate Republicans had proposed an amendment to the Inflation Reduction Act that would prevent the IRS from using its new funding to audit taxpayers earning less than $400,000, but all 50 Senate Democrats voted against the amendment ahead of passing the bill.
A similar measure introduced by House Republicans ahead of that chamber’s vote on Mr. Biden’s bill was also defeated when Democrats refused to support it.
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