Who wants to be an Internal Revenue Service enforcement agent? Turns out, hardly anyone.
President Biden’s plan to boost government revenue over the next decade by adding 87,000 IRS agents is on a collision course with the hard reality that they can’t even recruit enough workers now to meet existing staff levels, according to recent studies.
That could seriously imperil Mr. Biden’s goal of using the IRS to generate $124 billion more in government revenue through 2031 to pay for portions of the $740 billion climate, tax, and health care bill he signed into law last week.
The legislation includes $80 billion to empower the IRS to hire more auditors. These auditors would chase down tax cheats, thus boosting government revenue.
The Biden administration has pitched the plan as a sure-fire moneymaker for the federal government. Still, there is one snag: The IRS is already struggling to attract and retain talent.
“This plan is going to be extremely difficult to achieve. The IRS is competing with lots of employers out there, and not everyone wants to be the bad tax guy or spend hours of the day poring over boring IRS documents,” said Rachel Greszler, a senior research fellow on budget and entitlements at The Heritage Foundation.
IRS Commissioner Chuck Rettig has urged patience.
After Mr. Biden signed his massive spending bill, Mr. Rettig said in a statement that “changes will not be immediate” and the hiring spree “will take time.”
An agency spokesperson contacted by The Washington Times had no comment beyond referring back to Mr. Rettig’s statement.
The IRS has roughly 79,000 employees, so the funding could more than double its enforcement capacity. Yet the agency’s numbers show it has lost more than 20,000 full-time employees, or about 20% of its workforce, over the past decade.
That deficit is expected to increase soon because an estimated 52,000 of the IRS’s 83,000 employees, or 63%, will retire or resign in the next six years.
The IRS loses employees faster than other federal agencies. Its average annual attrition rate is 7.3%, compared with 5.8% for all other federal agencies, according to the IRS strategic plan for fiscal years 2022-2026.
A Government Accountability Office report in February found that the IRS failed to meet its fiscal 2021 hiring goals for its critical front-line workers who process returns. The report said the employee attrition rate was 17% last year, more than double the average for the total IRS workforce, which caused audit rates to plunge.
Among revenue agents and revenue officers, the workers who handle the most complicated audits, 40% of those highly skilled workers have left the agency in the past decade.
Without enough processing employees, the IRS had a backlog of 9.7 million unprocessed individual 2021 returns. It is expected to catch up with the backlog by the end of this year.
For the IRS to achieve Mr. Biden’s hiring ambition, the agency will have to grow at an annual rate of 15% over the next decade, even though its overall workforce shrank by roughly 8% last year.
“It’s going to be a real struggle, if not impossible, for the IRS to get employees in place, and whether or not they stick around,” Ms. Greszler said.
Mr. Rettig has acknowledged his agency’s difficulties in hiring.
In March, the Biden administration sought to help by granting the IRS direct hiring authority. The Office of Personnel Management designation can allow federal agencies to expedite hiring when an employee shortage becomes severe.
That means the agency can bring people on board within 45 days rather than six to eight months. Private-sector employers can bring people on board in days instead of weeks in the highly competitive labor market.
The agency had been requesting direct hiring authority for more than two years.
The agency is stuck paying below-market wages to high-level accountants and lawyers and to workers who open the mail and process tax returns.
Private-sector employers advertised 10.7 million jobs at the end of June, the Labor Department reported this month. Although the number of openings has declined since April, it is among the highest in decades.
Coupled with a 3.5% unemployment rate, the labor market has nearly two job openings for every unemployed person.
Front-line IRS employees who process returns are paid about $15 an hour, less than big retailers such as Amazon, Walmart and Target, which pay more than $20 an hour for the same labor pool.
“The difference between $15 and $20 is whether or not they are going to have a lunch or a dinner, and what it’s going to be. So we need assistance,” Mr. Rettig said in testimony before Congress this year.
Democrats fought to include measures in Mr. Biden’s bill that would let the IRS hire on an expedited basis at higher salaries, but Senate Republicans stripped the provisions on procedural grounds.
If the agency weren’t struggling to fill positions, Mr. Rettig said, it could make a “sizable dent” in tracking down tax scofflaws, which are estimated to cost the government more than $1 trillion per year.
Mr. Rettig, who was appointed by President Trump, told lawmakers on the House Ways and Means Committee that the IRS is using incentives such as tuition reimbursement programs and child care credits.
It’s unclear how much operating costs will eat up the IRS’s newfound windfall.
In 1987, the IRS workforce exceeded 100,000 and its expenditures were $4.4 billion, or $10.5 billion in 2021 money, according to agency data. Last year, with a workforce of roughly 79,000 employees, the agency’s expenditures exceeded $12.4 billion.
The IRS will first have to increase its human resources staff to hire thousands of people over the next decade. It costs an agency six to nine months of salary to replace an employee. With the average IRS employee earning $75,000 a year, that money could add up fast.
The IRS has not outlined specific plans for how the funds will be used to hire employees over the next decade and what roles those employees can fill. Although more than $80 billion is earmarked for enforcement, the agency has signaled that some of the funds will be used to improve customer service and information technology.
That lack of clarity has opened the door for criticism from Republicans, who depict the agency as armed thugs kicking down Americans’ doors to take their income.
Appearing on Fox News last week, Sen. Charles E. Grassley, Iowa Republican, compared IRS agents to a strike force targeting business owners.
“Are they going to have a strike force that goes in with [AR-15s] already loaded ready to shoot some small-business person in Iowa with these?” Mr. Grassley said. He warned that the IRS will target “middle-class and small-business people.”
Mr. Grassley was alluding to an online IRS job ad that listed under the “major duties” of applicants, “being able to carry a firearm and be willing to use deadly force if necessary.”
Democrats say such statements are ridiculous.
Sen. Ron Wyden, Oregon Democrat, dismissed Mr. Grassley’s claims as “incendiary conspiracy theories.”
“It’s unbelievable that we even need to say this, but there are not going to be 87,000 armed IRS agents going door to door with assault weapons,” Mr. Wyden said.
Still, Republicans say more employees will ultimately mean more audits for average Americans. Democrats, including Treasury Secretary Janet Yellen, dispute that claim. In a letter, Ms. Yellen pledged that “audit rates will not rise relative to recent years for households making under $400,000.”
It’s unclear what “relative to recent years” means for taxpayers.
Audit rates have dropped in recent years because of the COVID-19 pandemic and cuts to IRS funding. The administration probably won’t want to stick to those scaled-back numbers as its baseline.
As for whom the audits would target, the Biden administration said 0.1% of Americans with incomes of $75,000 to $100,000 were audited in 2019.
However, the Joint Committee on Taxation, Congress’ tax scorekeeper, concluded that 78% to 90% of underreported tax income would come from Americans earning less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000.
While campaigning for president in 2020, Mr. Biden vowed not to raise taxes on any American earning less than $400,000 a year.
Senate Republicans proposed an amendment to the Inflation Reduction Act that would prevent the IRS from using its new funding to audit taxpayers earning less than $400,000, but all 50 Senate Democrats voted against the amendment.
A similar measure introduced by House Republicans ahead of a vote on Mr. Biden’s bill was also defeated when Democrats refused to support it.