Treasury Department Secretary Janet Yellen acknowledged on Friday that 90 percent of IRS audits will be conducted on small businesses and families, not billionaires.
Testifying before the House Ways and Means Committee, Rep. Adrian Smith (R-NE) questioned Yellen on the ambiguity of her opening statement. Smith prefaced his question by noting the 87,000 new IRS agents hired at the agency over the next decade to conduct tax enforcement on Americans.
“Regarding the audits, there has been confusion about the meaning of the directive that you cited,” Smith said in his line of questioning. “Are you talking about the total number of audits or the proportion of audits on families and small businesses under 400,000 dollars?”
“I’m talking about the proportion of those small businesses and families,” Yellen admitted.
Smith responded, “So the proportion is 90 percent. Ninety percent of the new audits will be, according to the data — that we can expect up to 90 percent of new audits on those making less than $400,000.”
Yellen tried to draw attention to the total number of audits and not the proportion of audits that will disproportionally impact small businesses and families.
“The purpose of this legislation is to vastly increase the audit rate on high income, high wealthy, complex partnerships,” she said without denying the 90 percent proportion.
Smith reminded Yellen that “the rates of audits and commitments I believe are certainly very clear”:
🚨🚨Secretary Yellen just admitted before @WaysandMeansGOP that 90% of new audits under the Inflation Act will be on families and small businesses, not "billionaires and tax cheats."
That is exactly why @HouseGOP passed my bill with @RepSteel to rescind this funding. ⤵️ pic.twitter.com/nqmslEo4t0
— Rep. Adrian Smith (@RepAdrianSmith) March 10, 2023
In August, Yellen told IRS Commissioner Charles Rettig that the new IRS agents President Joe Biden’s 2022 Inflation Reduction Act designated would not increase audits rates “relative to recent years” on Americans earning under $4000,000 a year:
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.
Although Yellen promised to not increase the proportion of audits for those earning under $400,000 beyond historical levels, that pledge is not enshrined in law.
In February, Sen. Mike Crapo (R-ID) questioned the now-newly confirmed IRS chief Danny Werfel during his confirmation hearing about how he would keep Yellen’s under-$400,000 pledge, noting that it is not law.
“Secretary Yellen’s statement leaves a lot of wiggle room,” Crapo explained. “I don’t expect to see wiggle room in this commitment.”
“I look forward to working with you and you holding me accountable for that,” Werfel replied.
On Wednesday, Biden released a proposed 2024 budget requesting American taxpayers increase IRS funding by 15 percent in fiscal year 2024 to conduct audits. The proposed 15 percent increase is in addition to the previously allocated $79 billion over the next decade from the 2022 Inflation Reduction Act.
Republicans have widely opposed increasing taxpayer funds to the IRS and its desire to hire 87,000 new agents. House Republicans in January voted to slash funding for the agency after pledging to repeal the nearly $80 billion allocation from 2022 that funded the 87,000 new IRS agents.
Follow Wendell Husebø on Twitter @WendellHusebø. He is the author of Politics of Slave Morality.
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