WASHINGTON — The IRS won’t get the appropriations boost for the ongoing fiscal year that Democrats had hoped for, adding emphasis to the party’s push to offer the agency $80 billion in extra funds through their stalled budget reconciliation package.
Sen. Chris Van Hollen, the Maryland Democrat who chairs the appropriations subcommittee overseeing the IRS budget, said the agency will get a “healthy increase” in the delayed fiscal 2022 spending package lawmakers are aiming to finalize by March 11. But he said it’s less than Democrats proposed in the fall and won’t be enough to fix the Internal Revenue Service’s long-term woes.
“We’re not going to be able to do what we want to do,” Van Hollen said. “We’re gonna prioritize funding for the IRS because they need the money badly to improve their systems, provide customer service. As you know, they have a backlog at the IRS when it comes to refunds.”
In October, Senate Democrats proposed almost $29.4 billion in discretionary spending in their fiscal 2022 Financial Services appropriations bill. That would be a nearly $4.8 billion boost, or more than 19 percent over fiscal 2021. The measure included $13.6 billion for the IRS, which would give the agency a nearly 14 percent year-over-year increase — a rise in line with President Joe Biden’s budget request.
Those plans are being squeezed as Democrats hammer out a deal with Republicans that can get them the votes they need to move an omnibus appropriations package through the evenly divided Senate.
Van Hollen attributed the smaller budget increase for the IRS to a significantly lower rise for the Financial Services subcommittee allocation compared to Democrats’ fall proposal. The Financial Services panel oversees funding for the federal judiciary, Treasury Department, District of Columbia and dozens of other federal offices and agencies.
Negotiating details
Top appropriators reached a “framework” agreement last week but have offered little clarity on what that entails, and they’re still negotiating details. The GOP has sought a level of parity between defense and nondefense spending, a point that the top Republican on the Senate Appropriations panel, Richard C. Shelby of Alabama, reiterated on Thursday.
That means Democrats will likely need to pare back what they proposed in the fall, which would’ve provided a significantly bigger boost to nondefense spending. “Look, unfortunately as you know, this whole category got cut” from the initial spending bills, Van Hollen said. “So we’re not going to be able to do what we want to do.”
Van Hollen said that while the IRS won’t see as big of a funding increase as initially proposed, its boost will be higher than other agencies under the subcommittee’s purview. He described the IRS budget as the panel’s “number one priority.”
He said the shift means Democrats must move forward with a plan to provide $80 billion in extra funding to the IRS outside the annual appropriations process. That funding is part of a $2.2 trillion climate and social safety net package currently on ice because of disagreement on spending.
The funding is largely focused on enforcement, so it would help pay for the package by bringing in tax dollars owed that would’ve otherwise gone uncollected.
“This is going to be an improvement over where they are now, but it will not be enough to tackle the long-term issues, and we’ve got to come back and finish the job,” Van Hollen said.
The party seems to agree on money for the IRS, which would also include extra for other IRS departments including taxpayer services and systems modernization.
But if they can’t agree on the broader reconciliation package — which avoids a GOP filibuster and needs only Democrats’ votes to pass — they’ll likely run into too much Republican opposition to give the IRS budget a major boost.
That divide was on display Thursday when the Senate Finance Committee convened a hearing on the ongoing tax season.
“I for one am skeptical that technology and money, which seem to be the answer to a lot of our problems these days, is going to be the panacea that’s gonna solve the problem,” Sen. John Cornyn, R-Texas, said.
