House GOP Demands IRS Budget Cuts to Pay for Israel Aid

The Washington Post / Jeff Stein, Jacob Bogage

12:34 JST, October 31, 2023

WASHINGTON – House Republicans on Monday unveiled a proposal to pay for emergency aid for Israel’s war against Hamas by cutting IRS funds aimed at cracking down on rich tax cheats and improving taxpayer service.

The legislation, released by the House Rules Committee, calls for approving roughly $14 billion primarily in military aid to Israel and cutting about the same amount from the IRS budget. President Biden has proposed giving Israel roughly the same amount in aid but did not call for offsetting cuts to other parts of the budget. The new House speaker, Rep. Mike Johnson (R-La.), has said the new expenditure must be covered by other spending reductions to avoid adding to the debt. Biden also called for the Israel aid to be packaged with roughly $60 billion for Ukraine – an approach the GOP bill rejected.

The legislation reflects the GOP’s ongoing determination to undo the IRS expansion that Biden secured in 2022 in the Inflation Reduction Act, which boosted the agency’s funding by $80 billion to improve taxpayer services and pay for more enforcement actions against wealthy tax cheats. Biden and House Republicans agreed to repeal roughly $20 billion of that $80 billion as part of a deal in May to suspend the U.S. debt ceiling. Now, Republicans are pushing for more reductions.

The GOP bill would pare back funds for most parts of the IRS expansion, including increased enforcement and a new online portal to allow taxpayers to file their taxes for free directly with the government. The legislation excludes cuts to improved taxpayer services that have helped the IRS reduce wait times for calls.

Using the IRS funding to offset the Israel aid might not actually save money: The nonpartisan Congressional Budget Office had estimated in 2022 that the $80 billion IRS expansion would cut the deficit by more than $100 billion, by improving collections and enforcement.

“This is the reverse of the right way to think about this,” said Mark Mazur, the Biden administration’s former assistant treasury secretary for tax policy. “This is like if you take a dollar from the IRS and throw a $5 bill out the window.”

Conservatives say they are optimistic that the debt ceiling deal means the administration has demonstrated it will fold on IRS funding to approve other priorities and could be forced to do so again.

“It becomes the piggy bank the Democrats have accepted already,” said Grover Norquist, an anti-tax crusader at Americans for Tax Reform, which opposed the expansion.

The GOP’s bill kicks off what is likely to be a fierce political battle over support for Israel. Democrats in both chambers of Congress oppose the House GOP bill, and the White House is expected to oppose it as well.

White House press secretary Karine Jean-Pierre blasted the bill in a statement.

“Politicizing our national security interests is a nonstarter,” she said. “Demanding offsets for meeting core national security needs of the United States – like supporting Israel and defending Ukraine from atrocities and Russian imperialism – would be a break with the normal, bipartisan process and could have devastating implications for our safety and alliances in the years ahead.”

Many Senate Democrats, with one notable exception, declared the House Republican bill dead on arrival in the upper chamber.

“I had a brief moment of hope the House was getting its act together, but that sounds disastrous to me,” said Sen. Chris Murphy (D-Conn.).

Sen. Joe Manchin III of West Virginia, a conservative Democrat and a key backer of the Inflation Reduction Act, which provided the additional IRS funding, left the door open to supporting a bill that clawed back the money. The IRS needs money for technological modernization, he said, but could do without money for increased tax enforcement on high-income earners.

“If you’re not going to do any harm to the IRS, yes, it’s legitimate,” Manchin said. “If it’d harm the technology that’s been planned out for the next five to 10 years, it would be very, very hard for me to support.”

Senate Republicans mostly cheered the bill and its cuts to the IRS, which has long been a conservative bugaboo.

“If we’re taking money away from the 87,000 IRS agents, I’m all about that,” said Sen. Markwayne Mullen (R-Okla.), repeating a debunked statistic about tax agency staffing.

Democrats in the House also indicated they would oppose the bill.

“House Republicans are setting a dangerous precedent by suggesting that protecting national security or responding to natural disasters is contingent upon cuts to other programs,” Rep. Rosa L. DeLauro of Connecticut, the top Democrat on the House Appropriations Committee, said in a statement. “The partisan bill House Republicans introduced stalls our ability to help Israel defend itself and does not include a penny for humanitarian assistance.”