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Deal to Suspend Debt Ceiling Cuts IRS Funding

S.J. Steinhardt
Published Date:
May 30, 2023

The legislation resulting from the agreement reached by President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) to increase the debt ceiling for two years contains a reduction in the finding allocated to the IRS under the Inflation Reduction Act, multiple news organizations reported.

The $80 billion in increased funding in the Inflation Reduction Act was meant for a number of purposes, such as hiring more agents, increasing enforcement, improving customer service and upgrading systems. The Republican House majority won a rescission of $1.38 billion of this amount, with another $20 billion to be repurposed for nondefense discretionary spending, The New York Times and The Los Angeles Times reported.

The Inflation Reduction Act was intended to provide steady funding to the IRS over nine years, so that the agency could make long-term plans, according to The Wall Street Journal. But the $80 in funding was very unpopular with Republicans in Congress. 

Increased IRS funding has been demonstrated to be a good return on investment. Every one dollar increase in IRS funding for enforcement results in $5 to $9 of increased revenues, the Congressional Budget Office (CBO) estimated in September 2021. “The $20 billion being diverted from the agency could therefore raise as much as $142 billion through 2031,” Reuters Breakingviews maintained.

The bill limits discretionary spending to 1 percent annually for the next two years; imposes new work requirements on some low-income people who receive Supplemental Nutritional Assistance Program up to age 54, instead of up to age 50; and gets back about $30 billion in unspent COVID-19 relief money. Some of that money will also be repurposed for nondefense discretionary spending.  

The debt ceiling legislation also requires the Biden Administration to end the current pause on student loan repayments by late August. It does not end the administration’s plan to forgive $430 million in student debt. A case challenging that plan is currently before the U.S. Supreme Court.

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