In remarks touting "Bidenomics" in Maryland last month, President Biden again repeated a tax pledge that goes back to his 2020 campaign.
"We ought to make the tax code more fair, not less fair. That’s why I promised that no one making under $400,000 – who had never seen that – but no one making under $400,000 will see their federal taxes go up a single penny," Biden said.
The day after Biden’s remarks, Internal Revenue Service Commissioner Danny Werfel announced the agency is hiring 3,700 new employees as part of its expansion to target these wealthy taxpayers.
"These new employees will be focused on higher-income and complex tax areas like partnerships, not average taxpayers making less than $400,000," Werfel said.
The problem as far as auditing goes is "there is no way to identify the complete population of taxpayers that meet the criterion of $400,000 or more," according to the Treasury Inspector General for Tax Administration.
IRS guidelines for high earners haven’t changed since 1976 when it categorized anyone earning $200,000 as high income, according to TIGTA. Further, the IRS passed on the TIGTA recommendation to formally identify $400,000 as the threshold for high income because the agency wants to maintain "agility," the report says.
"It [the IRS] asserted that a static and overly proscriptive definition of high-income taxpayers for purposes of focusing on income levels above which taxpayers have unique and varied opportunities for tax would serve to deprive the IRS of the agility to address emerging issues and trends," says the internal watchdog, which released its findings on Aug. 31.
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The inspector general’s findings "blew up the narrative," on taxing only the rich, and shows Democrats are "knowingly lying," said Grover Norquist, president of Americans for Tax Reform.
"They have to convince the majority of Americans when they say they’re going to raise taxes, it doesn’t mean you," Norquist told Fox News Digital. "House Republicans should subpoena the audits to rub their nose in it and keep exposing the lie."
Norquist noted that during the debate over the Inflation Reduction Act in August 2022, every Senate Democrat voted against a proposed amendment by Sen. Mike Crapo, R-Idaho, to legally restrict any new audits of taxpayers earning less than $400,000. The bill boosted the IRS budget by $80 billion over 10 years.
After Biden signed the act, Treasury Secretary Janet Yellen sent a letter to then-IRS Commissioner Charles Rettig with instruction that "small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited."
The IRS contends the inspector general’s findings do not counter the administration’s priorities.
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"The IRS is not increasing the audit rate on those earning less than $400,000," an IRS spokesperson told Fox News Digital. "The IRS is focused on pursuing high-income earners, partnerships, large corporations, and promoters abusing the nation's tax laws. The recommendation in the TIGTA report has no bearing on the IRS’s implementation of Secretary Yellen’s directive."
However, the TIGTA report says when the definition of the high-income threshold is too low, it means more audits of a wider group of people, and says such audits would be less productive.
"Currently, the high-income terminology is being used loosely inside the IRS with no common understanding of what the term means," the inspector general report says. "At a minimum, the IRS should accept the Treasury Secretary’s $400,000 directive as the new high-income floor on which IRS leadership can focus enforcement efforts."
The inspector general report said the IRS lacks an updated definition of high-income taxpayer.
"The Tax Reform Act of 1976 required annual publication of data on individual income tax returns reporting income of $200,000 or more," the report says. "The current examination activity code schema still uses $200,000 as the main threshold."
As for a pending hiring spree, the report by the Treasury Inspector General for Tax Administration says, "IRS training of revenue agents for high-income examinations lacks a clear definition of individual high-income taxpayers."
This finding is relevant considering the announcement of 3,700 new hires, Norquist said.
"For early hiring, 3,000 new agents don’t seem too scary considering about 87,000 new agents will likely be hired," Norquist said. "But it allows them to tell their left-wing friends they are doing something. Don’t expect an announcement for later hiring binges."
