WASHINGTON — President Joe Biden, in an effort to pay for his ambitious economic agenda, is expected to propose giving the
Internal Revenue Service an extra $80 billion and more authority over the next 10 years to help crack down on
tax evasion by high-earners and large corporations, according to two people familiar with the plan.
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The additional money and enforcement power will accompany new disclosure requirements for people who own businesses that are not organized as corporations and for other wealthy people who could be hiding income from the government.
The Biden administration will portray those efforts — coupled with new taxes it is proposing on corporations and the rich — as a way to level the tax playing field between typical American workers and very high-earners who employ sophisticated efforts to minimize or avoid taxation.
Biden plans to use money raised by the effort to help pay for the cost of his “
American Families Plan,” which he will detail before addressing a joint session of Congress on Wednesday.
That plan, which follows his $2.3 trillion infrastructure package, is expected to cost at least $1.5 trillion and will include universal prekindergarten, a federal paid leave program, efforts to make child care more affordable, free community college for all and tax credits meant to fight poverty.
The administration also aims to pay for the plan by raising the top marginal income tax rate for wealthy Americans to 39.6 percent from 37 percent and raising capital gains tax rates for those who earn more than $1 million a year. Biden will also seek to raise the tax rate on income that people earning more than $1 million per year receive through stock dividends, according to a person familiar with the proposal.
Administration officials have privately concluded that an aggressive crackdown on tax avoidance by corporations and the rich could raise at least $700 billion on net over 10 years. The $80 billion in proposed funding would be an increase of two-thirds over the agency’s entire funding levels for the past decade.
The administration is expected to portray the $780 billion it expects to collect through enhanced enforcement as conservative. That figure includes only money directly raised by enhanced tax audits and additional reporting requirements, and not any additional revenue from people or companies choosing to pay more taxes after previously avoiding them.
Previous administrations have long talked about trying to close the so-called tax gap — the amount of money that taxpayers owe but that is not collected each year. This month, the head of the IRS, Charles Rettig, told a Senate committee that the agency lacked the resources to catch tax cheats, costing the government as much as $1 trillion a year.
The agency’s funding has failed to keep pace with inflation in recent years, amid budget tightening efforts, and its audits of rich taxpayers have declined.
Biden aims to change that. His economic team includes a
University of Pennsylvania economist, Natasha Sarin, whose research with the Harvard University economist Lawrence H. Summers suggests that the United States could raise as much as $1.1 trillion over a decade via increased tax enforcement.
Summers praised Biden’s expected plan in an email late Monday. “This is the broadly right approach,” he said.
“Deterioration in IRS enforcement effort and information gathering is scandalous. The Biden plan would make the American tax system fairer, more efficient and, I’m confident, raise more revenue than official scorekeepers now forecast — likely a trillion over 10 years.”
Biden’s efforts would incorporate some of Sarin and Summers’ suggestions, including investing heavily in information technology improvements to help the agency better target its audits of high-earners and companies.
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