Richard Neal

Mr. NEAL

Mr. NEAL. Mr. Speaker, I thank the gentleman from Kansas, my friend. He just pointed out that the people at the bottom are audited more than the people at the top. That is precisely the point that we are attempting to make here during the course of the next few minutes. Mr. Speaker, I yield 1 minute to the distinguished gentleman from Maryland (Mr. Hoyer), who is the former majority leader.

Mr. NEAL. Mr. Speaker, let me congratulate Mr. Smith, incidentally, on his recent elevation to become the chairman of the Ways and Means Committee. We look forward to a productive session during the next couple of years. Mr. Speaker, I include into the Record a blog post by the Center on Budget and Policy Priorities summarizing the fact check that has repeatedly debunked the false claim that we just heard a few seconds ago, that the IRS is going to hire 87,000 new agents immediately. [From Center on Budget and Policy Priorities, January 9, 2023] House GOP's First Bill: A Misleading Gambit To Protect Interests of Wealthy Tax Cheats (By Chuck Marr) House Republicans have announced that their first legislative priority is to rescind nearly all of the Inflation Reduction Act's $80 billion in ten-year funding for the IRS, while repeating falsehoods and inflammatory rhetoric about how that funding will be used. While the Republicans have launched a campaign about a false ``army'' of 87,000 agents, the debate should focus on one accurate and alarming number: the IRS has 2,284 fewer skilled auditors to handle the sophisticated returns of wealthy taxpayers than it did in 1954. The decade-long, House Republican-driven budget cuts have created dysfunction at the IRS, where relatively few millionaires are now audited. If House Republicans succeed in rolling back this critically needed funding and maintaining this dysfunction, the IRS would be woefully understaffed, hindering its ability to administer the tax code and collect legally owed taxes--particularly from high-income and high- wealth taxpayers. On behalf of honest taxpayers, policymakers should reject the House Republican effort to protect wealthy tax cheats. The IRS workforce is composed of civilian public servants, such as accountants and customer service representatives, who collect nearly all the federal revenue to fund our government, from Medicare and Social Security to our armed forces. Its skilled auditors, also known as revenue agents, are highly trained to handle sophisticated tax returns of wealthy people and multinational corporations. All of these IRS employees perform a core function of government, are central to the workings of our democracy, and work on behalf of honest taxpayers. Republican IRS critics, however, have constructed a narrative around the IRS workforce becoming an ``army'' of 87,000 ``armed agents'' whose enemies are ``hardworking American families and small businesses.'' This rhetoric is false and dangerous. Fact checkers have repeatedly debunked the 87,000 figure, which comes from a prior Treasury estimate that it would use new funding to hire 87,000 total staff over the next ten years, including IRS employees in all departments, not just skilled auditors. These are people who answer phones, process returns, program computers, as well as a fraction--albeit an important one--who audit complex tax returns. The House GOP campaign ignores the reality of today's IRS-- which has resulted from the sharp budget cuts that Republicans have pushed since 2010--as well as the harm that would flow from rescinding much of the Inflation Reduction Act's new IRS funding. The upcoming debate needs to cut through the obfuscation of the House Republican campaign and focus on honest and pertinent numbers. Consider, in 2021, the IRS had 8,321 skilled auditors. That's 40 percent fewer than the agency had in 2010, the year before House Republicans were in the majority and began driving the last decade of steep IRS budget cuts. Moreover, it's 2,284 fewer revenue agents than the IRS had in 1954--not a typo. The last time the IRS had fewer revenue agents than it has today was in 1953. Today's economy is seven times larger than it was in 1953 and our population has more than doubled since then. Today's tax returns of wealthy people and large multinationals are more complex and global, which take more time for auditors to review. As a result of these budget cuts and fewer skilled auditors, audit rates have plummeted for wealthy individuals and large corporations. For the largest corporations (those with more than $1 billion in assets), the audit rate fell by more than half between 2010 and 2017. For millionaires, the audit rate fell by roughly 77 percent over the same period. Preliminary audit data for 2018 and 2019 suggest that the audit rate may have declined over 90 percent between 2010 and 2019. House Republicans want to scare people with their false claims about how the IRS would use the new resources. But the reality is that, today, the IRS skilled audit staff is 2,284 smaller than in 1954, only a tiny fraction of millionaires is audited, and large multinationals can hire large squads of lawyers to easily overwhelm the resources of the IRS. One only needs to skim President Trump's tax returns, the indictment of convicted tax cheat Paul Manafort, and a ProPublica investigation of how Facebook outgunned the IRS to grasp the resources necessary to be serious about enforcing our tax laws and how reckless it would be to keep the number of skilled auditors at 1950s levels, as the House Republicans would do. Honest taxpayers and business owners deserve better. They deserve an IRS that processes their tax returns and tax refunds efficiently, answers the phone when they call with questions, and ensures that the wealthy and profitable corporations are paying the taxes they legally owe. A key element of a healthy, functioning democracy is a transparent tax system that is fairly enforced so that people and corporations pay what they owe and the well-heeled and powerful cannot flout their responsibility to pay their taxes. Efforts to protect wealthy tax cheats and purposely undermine the IRS's ability to enforce tax laws are anti- democratic and should be resoundingly rejected.

Mr. NEAL. Mr. Speaker, I include in the Record a FactCheck.org article confirming that not all of the 87,000 people who will be hired are going to work on enforcement. [From FactCheck.org, Aug. 18, 2022] IRS Will Target `High-Income' Tax Evaders with New Funding, Contrary to Social Media Posts (By Brea Jones)

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Connecticut (Mr. Larson) who is a distinguished member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, that is precisely the point that we have attempted to make. Customer service is not occurring because the IRS has been cut by 30 percent over the last 15 years. Mr. Speaker, I include in the Record a letter from the IRS Commissioner to the House of Representatives confirming that the IRS will not raise audit rates on those making under $400,000 a year. Department of the Treasury, Internal Revenue Service, Washington, DC, August 4, 2022. Dear Member of the House of Representatives, It has been the greatest honor of my professional life to spend the last four years at the helm of the IRS. I am struck each day by the commitment of dedicated IRS employees to helping American families. And our employees have done all that without the tools to do so effectively. For too long, the agency has not had the resources that it needs to ensure the tax laws are enforced fairly and that Americans receive the level and quality of service they deserve. We are the greatest country in the world, yet the agency that touches more Americans than any other continually struggles to receive sufficient resources to fulfill its important mission. The resources in the reconciliation package will get us back to historical norms in areas of challenge for the agency--large corporate and global high-net-worth taxpayers-- as well as new areas like pass-through entities and multinational taxpayers with international tax issues, where we need sophisticated, specialized teams in place that are able to unpack complex structures and identify noncompliance. These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans. As we've been planning, our investment of these enforcement resources is designed around the Department of the Treasury's directive that audit rates will not rise relative to recent years for households making under $400,000. Other resources will be invested in employees and IT systems that will allow us to better serve all taxpayers, including small businesses and middle-income taxpayers. Enhanced IT systems and taxpayer service will actually mean that honest taxpayers will be better able to comply with the tax laws, resulting in a lower likelihood of being audited and a reduced burden on them. Large corporate and high-net-worth taxpayers often engage teams of sophisticated representatives who pursue unsettled or sometimes questionable interpretations of tax law. The integrity and fairness of our tax administrative system relies upon the ability of our agency to maintain a strong, visible, robust enforcement presence directed to these and other similarly situated taxpayers when they are noncompliant. These important efforts also support honest taxpayers who voluntarily comply with their filing and reporting requirements. The IRS has fewer front-line, experienced examiners in the field than at any time since World War II, and fewer employees than at any time since the 1970s. Advances in technology have been helpful but have not kept pace with the ever-increasing responsibilities and challenges facing the IRS. As a result, the IRS has for too long been unable to pursue meaningful, impactful examinations of large corporate and high-networth taxpayers to ensure they are paying their fair share. This creates a direct revenue loss from evaders and lessens the potential to deter others from pursuing a similar path of noncompliance. Every American should support a fair and impartial system of tax administration supported by an appropriately resourced tax administrator. In fact, the continued success of our country depends, in part, upon the success of the agency in appropriately, fairly and impartially enforcing the tax laws and in providing meaningful, impactful services to every American. As an extremely proud American, I'm grateful for your support of the IRS and our dedicated employees. I cannot be forceful enough in emphasizing that these resources will be transformative for the agency and for American taxpayers. I am available to meet with you at your convenience to discuss the foregoing. Thank you, Charles P. Rettig.

Mr. NEAL. Mr. Speaker, I include in the Record a letter from Secretary Yellen to the IRS Commissioner, directing the IRS not to use any additional funding to increase audits on small businesses and households earning less than $400,000 a year. Department of the Treasury, Secretary of the Treasury, Washington, DC, August 10, 2022. Charles P. Rettig, Commissioner, Internal Revenue Service, Washington, DC. Dear Commissioner: The Inflation Reduction Act includes much-needed funding for the IRS to improve taxpayer service, modernize outdated technological infrastructure, and increase equity in the tax system by enforcing the tax laws against those high-earners, large corporations, and complex partnerships who today do not pay what they owe. These crucial investments have been a focus of the Biden Administration since the President's first day in office, and I was heartened to see the legislation pass the Senate this weekend. Notwithstanding the changes that arose because of Republican challenges during the Byrd process, I write today to confirm the commitment that has been a guiding precept of the planning that you and your team are undertaking: that audit rates will not rise relative to recent years for households making under $400,000 annually. 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 business 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. Instead, enforcement resources will focus on high-end noncompliance. There, sustained, multiyear funding is so critical to the agency's ability to make the investments needed to pursue a robust attack on the tax gap by targeting crucial challenges. like large corporations, high-net-worth individuals and complex pass-throughs, where today the IRS has resources to initiate just 7,500 audits annually out of more than 4 million returns received. This is challenging work that requires a team of sophisticated revenue agents in place to spend thousands of hours poring over complicated returns, and it is also work that has huge revenue potential: indeed, an additional hour auditing someone making more than $5 million annually generates an estimated $4,500 of additional taxes collected. This is essential work that l know the IRS is eager to undertake. For regular taxpayers, as you emphasized last week, the result of this resource infusion will be a lower likelihood of audit by an agency that has the data and technological infrastructure in place to target enforcement resources where they belong--on the high end of the income distribution, where the top 1 percent alone is estimated to not be paying $160 billion in owed taxes each year. That's important as a matter of revenue-raising, but it's also essential as a matter of fairness. Crucially, these resources will support a much-needed upgrade of technology that is decades out-of-date, and an in vestment in taxpayer service so that the IRS is finally able to communicate with taxpayers in an efficient, timely manner. I look forward to working with you on creating new digital tools to allow taxpayers to get information from the IRS instantaneously and on improving taxpayer service, so the agency is well-equipped to answer calls when they come in. This historic investment in our tax system will accomplish two critical objectives. It will raise substantial revenue to address the deficit; and it will create a fairer system, where those at the top who do not today comply with their tax obligations find it far less easy to do so, and where all taxpayers receive the service from the IRS that they deserve, and that your dedicated workforce is eager to deliver. The importance of the work ahead cannot be overstated. Sincerely, Janet L. Yellen.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Oregon (Mr. Blumenauer), a very capable member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Illinois (Mr. Davis), a very capable Member from Chicago.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from New York (Mr. Higgins), an individual whose knowledge of the economic system in America is unsurpassed.

Mr. NEAL. Mr. Speaker, the challenge that was offered by the gentlewoman from California is as simple as this: We are weaponizing billionaires not to pay their fair share. That is what is happening. What we are asking here is the simplicity of allowing people at the very top to pay their fair share. Mr. Speaker, I yield 1 minute to the gentlewoman from Alabama (Ms. Sewell), a capable and valued member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, a reminder that the 87,000 is over 10 years. The $80 billion is over 10 years. That is $8 billion a year for replacement of those who retire, who leave the service of the IRS. Mr. Speaker, I yield 1 minute to the gentleman from California (Mr. Panetta), another very capable member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from California (Ms. Chu), a very capable member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from Wisconsin (Ms. Moore), a very capable member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Michigan (Mr. Kildee).

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Virginia (Mr. Beyer), a very successful businessman and entrepreneur.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr. Evans), a very distinguished member of the Ways and Means Committee.

Mr. NEAL. Mr. Speaker, I think part of that new recruiting class at the IRS is going to simply answer the phones. That would be helpful, a step in the right direction. Mr. Speaker, I yield 1 minute to the gentleman from Illinois (Mr. Schneider), a CPA who really knows something about compliance.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from California (Mr. Gomez), not only a very capable member of the committee but, last week, during those 4 days here of utter chaos, he carried that child around this Chamber. During those 4 days, I think the child grew by 2 inches. That is how long we were there.

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from Texas (Ms. Jackson Lee).

Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from California (Mr. Sherman), who is a CPA, I believe.

Mr. NEAL. Mr. Speaker, as my friend, the gentleman from Nebraska pointed out, with the Presidential audit system, Joe Biden overpaid his taxes. I hope the Record will reflect that, that the Democratic President overpaid his taxes, and the IRS wisely made sure that he had the proper refund. Mr. Speaker, I yield 1 minute to the gentlewoman from Ohio (Ms. Kaptur), the longest serving woman in the history of Congress.

Mr. NEAL. Mr. Speaker, I yield myself the balance of my time for the purpose of closing. Mr. Speaker, this has been an edifying debate. But as Harry Truman noted, let's just talk about the facts. Let's debunk the argument that we are hiring 87,000 armed IRS agents to go knocking on doors in the middle of the night. This is a substantial investment in technology. This is a substantial investment in customer service. Yes, the $80 billion is over 10 years. That is $8 billion a year to improve customer service. That is what we are talking about. At least 8,000 agents retire from the IRS every year. We are simply replacing them. You know, in our school systems back home, when 200 teachers retire, we replace 200 teachers. That is what we are doing here with the IRS. They make this preposterous argument that all of a sudden, next week, 87,000 armed--because you always have to use the language that is incendiary enough to get people worked up around here--that 87,000 armed agents in the dark of night will be hounding innocent taxpayers, despite what Janet Yellen said about no taxpayer making under $400,000 a year is going to be targeted. Mr. Rossotti, the former IRS commissioner, not me, said at least $574 billion a year goes uncollected. He is a Democrat. A Republican IRS commissioner, Mr. Rettig, who we worked with, said it might be a trillion dollars a year that goes uncollected, a Donald Trump appointee, who stated that and raised that issue a number of times in front of the Committee on Ways and Means. Let me make a point that I raised earlier. Tax compliance in a representative democracy is a fundamental commitment to civilization and first-class services. So by not collecting this revenue, are we going to say down the road, well, maybe we will cut Social Security; maybe we will cut Medicare; maybe we will cut Medicaid; or maybe we will cut the American military. Now, we all know that in this discussion that the facts are very clear here. They have been upset with the IRS for a long period of time. We all remember the Lois Lerner episode, even though the facts in that case pointed out that the advocates on the right and the left were audited at the same rate. That is a fact. So as we close this argument out, let's stand up for the honest taxpayers in America and make sure that the IRS that currently cracks down on the EITC will be able to actually address some of the complexities of modern tax law, which we all agree, by the way, the system is far too complex, but I have been through that argument many times here, as well. This fear-mongering that you are hearing tonight about upgrading the technology and software investments at the IRS for the purposes of modeling for better tax compliance is just that. It is fear-mongering. All we want is a set of rules that is applicable to all as it relates to tax collection. This is not anything other than simply suggesting that there is a fairness that is applied to the Internal Revenue Service, so that they might address and make sure that those at the very top are complying with the same laws we ask the wage earners through withholding to address every single day. Thanks for a spirited debate, Mr. Speaker, and to our friends on the other side. Mr. Speaker, I yield back the balance of my time.

Mr. NEAL

Mr. NEAL. Mr. Speaker, on that I demand the yeas and nays.

Mr. NEAL

Mr. NEAL. Madam Speaker, pursuant to House Resolution 1529, I call up the bill (H.R. 9640) to amend the Internal Revenue Code of 1986 to provide for examination and disclosure with respect to Presidential income tax returns, and ask for its immediate consideration.

Mr. NEAL. Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the bill that is under consideration.