Sen. Rick Scott proposed cutting the IRS budget by half. The agency's commissioner said 'you might be better off and save more money by just shutting it down completely'

  • Senator Rick Scott, a Florida Republican, proposed cutting the IRS budget in half.

  • IRS chief Chuck Rettig said "you might be better off and save more money by just shutting it down completely."

  • The IRS is grappling with underfunding and understaffing amid new pandemic responsibilities.

The IRS is currently contending with a reduced budget, staff, and new pandemic-era responsibilities, with the agency trying to dig itself out of a hole of millions of unprocessed returns and late refunds.

Both the Treasury Department and the IRS have said that the agency needs much more long-term funding to get running at an acceptable capacity.

Then there's Republican Sen. Rick Scott's solution: Shrink the IRS's budget by 50%. That formed part of his "Rescue America" plan that he rolled out last month. He pitched it as a Republican agenda, though one that he introduced as a rank-and-file Republican instead of in his role as the head of the party's Senate campaign fundraising arm. Democrats are pummeling its proposed tax hikes for Americans ahead of the midterms.

Video: What it's like to do your taxes for the first time

In a Thursday Ways & Means Committee hearing, Representative Lloyd Doggett asked IRS Commissioner Chuck Rettig about the potential impact of halving the agency's budget.

"If the IRS budget was cut by 50%, you might be better off and save more money by just shutting it down completely," Rettig said. "We account for 96% of the gross revenue of the United States of America! How are you going to fund what we need to fund and what every American deserves?"

Doggett, a Democrat from Texas, said that "perhaps shutting it down is exactly what those who'd make this outrageous proposal have in mind."

But the architect of the plan didn't see it that way. Scott defended his agenda and argued he didn't intend to shutter the IRS by proposing drastic budget cuts.

"We got to make this system where we don't need a big IRS," the Florida Republican told Insider in a brief interview. "We got to make the system simple. I mean the IRS, it's so complex. If you can get lawyers and accountants you can figure out how to not pay taxes, it shouldn't be that way."

As Scott noted, tax evasion is a potentially trillion dollar problem. The Treasury Department has said that the wealthiest 1% of taxpayers dodge $163 billion in taxes annually.

But the answer to cutting down on that tax evasion might be the opposite of Scott's proposal. The Treasury has said that allocating $80 billion in funding to the IRS for enforcement — the amount President Joe Biden proposed in the currently defunct Build Back Better Act — could bring in $700 billion in tax revenue in the next ten years.

The IRS and Treasury Department have repeatedly sounded alarm bells over the agency's funding, or lack thereof. Heading into 2022, the IRS was still sitting on over 6 million unprocessed refunds, according to national taxpayer advocate Erin Collins.

Rettig has been outspoken about the "severe limitations" that the IRS faces "without long-term, predictable funding," and the burden that that places on taxpayers waiting for checks.

Read the original article on Business Insider