During a Thursday morning conversation with radio host Jack Heath, New Hampshire’s senior Sen. Jeanne Shaheen did not deny, as some Democrats do, that adding 87,000 new IRS agents means more audits for Americans earning less than $400,000. Instead, she told Granite Staters they have nothing to worry about — as long as they’re paying what they owe.
Shaheen acknowledged the $80 billion in the so-called “Inflation Reduction Act” to more than double the size of the IRS has been “presented as a threat.” When Heath asked her if only “big, big billion-dollar corporations” would be audited by those new agents, Shaheen did not pretend the new push for increased tax collections — a target of $200 billion in new money — would only hit Amazon and Google.
“The new people at the IRS are going to be doing a whole range of things,” Shaheen said. “I think for people who are paying their taxes, doing what they’re supposed to, those regulations aren’t going to change. I don’t think there’s any reason why businesses that are doing the right thing, that are paying their taxes and working hard, they shouldn’t have any more of a problem than they have had historically.”
That last phrase is key, tax experts say, because “historically” there have been far more audits of taxpayers under than $400,000 threshold than over.
In a letter to IRS Commissioner Charles P. Rettig, Treasury Secretary Janet Yellen appeared to be ordering the agency not to use the new resources on any taxpayers other than the uber-wealthy. But note the careful language.
“Audit rates will not rise relative to recent years for households making under $400,000 annually,” Yellen wrote. “Specifically, I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small businesses or households below the $400,000 threshold that are audited relative to historical levels. This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.” [italics added]
In other words, when the new money funds an additional 1.2 million audits as projected, the percentage of those audits would be the same for the under-$400,000 earners as before. But since they represented the majority of audits, that means most of those audited will likely earn less than the threshold.
As Isabelle Morales writes at Americans for Tax Reform, “If we take Yellen’s word that the share of audits will not change, then low-income Americans and small businesses are in real danger. Currently, households with less than $25,000 in annual earnings are five times more likely to be audited by the IRS than everyone else.”
Shaheen is honest enough not the make the false claim that there would be no additional audits among the less-than-wealthy. Both she and Sen. Maggie Hassan voted to kill an amendment to the reconciliation bill that would have expressly forbidden the IRS to use any of the new resources to audit anyone beneath the $400,000 cutoff. The amendment failed 50-50. If either New Hampshire senator had been a “yea,” it would have passed.
The new IRS spending also highlights another problem with the bill. The spending — on labor, equipment, and technology — begins right away, adding billions to the “demand” side of the economy at a time when demand is already driving inflation. But the new revenue would not begin coming in for several years — assuming the $200 billion projection is accurate. (Many economists dispute it.)
That revenue is needed to pay down the debt, which is the one part of the bill that contributes to inflation reduction, and 90 percent of the debt paydown happens after 2026. So whether the so-called “Inflation Reduction Act” will have a modest impact on inflation, for good or ill — and at least two independent analyses say the latter — consumers won’t feel it for years to come.
But the $739 billion in tax hikes and spending start immediately.
Both Reps. Annie Kuster and Chris Pappas have pledged to vote for the bill.