IRS commissioner warns cuts would widen deficit

The head of the Internal Revenue Service warned Thursday that proposed cuts to his agency's budget would ultimately cost the federal government more money and pushed back against accusations that he ignored laws for political purposes.

The comments from IRS Commissioner Daniel Werfel came in testimony before the House Ways and Means Committee as he approaches his first full year on the job. He has overseen a $60 billion overhaul of the tax collection agency. That funding has been scaled back from $80 billion under the Inflation Reduction Act of 2022, and Republican lawmakers are seeking further cuts.

“For every $100 million taken from the IRS, the deficit grows by $600 million over 10 years,” Mr. Werfel said, citing Treasury Department data.

Republicans took $20 billion from the IRS last year when they struck a deal with Democrats to lift the debt limit. They have called for additional recoveries during negotiations with the White House over how to pay for additional aid to Ukraine.

The threat of budget cuts has added uncertainty to the Biden administration's plans to upgrade the technology the IRS uses to process tax returns and boost the agency's ability to conduct audits, which Mr. Werfel has promised these will focus on complex business partnerships and wealthy individuals. .

Mr. Werfel said the agency has made significant progress over the past year by improving its responsiveness to taxpayers, clearing a backlog of unprocessed tax returns and taking steps to improve tax data security after the financial information of wealthy taxpayers, including former President Donald J. Trump, have been leaked in high-profile security breaches.

Mr. Werfel faced pressure over his management of the agency and whether he had ignored tax laws for political purposes. Republican lawmakers expressed particular concern about his decision to delay implementation of a controversial tax policy that would require users of digital wallets and e-commerce platforms such as Venmo, PayPal and Etsy to report small transactions to the IRS.

“I am extremely concerned that the IRS has been a little too focused on following the Biden administration's political cues rather than fulfilling its congressionally mandated duties,” said Rep. Carol Miller, a Republican from West Virginia , who accused the agency of engaging in an “illegal overreach.”

Mr. Werfel defended the delay, saying his job allowed him to implement tax laws so that taxpayers were not harmed by policies that could cause widespread confusion.

“I believe the IRS commissioner has the authority to enforce laws in a manner that safeguards taxpayer rights,” he said.

For years, the IRS has faced accusations that it is acting with a political agenda, as well as conspiracy theories about armed agents harassing businesses and taxpayers.

In response to questions about weapons and ammunition stockpiles the agency possesses, Mr. Werfel said that very few IRS agents used weapons and that most ammunition was for training purposes. The Treasury Department has said that only about 1 percent of new officers will work in jobs that require carrying weapons.

“Most IRS employees are customer service representatives,” Mr. Werfel said. “They are armed only with telephone headsets, and all our accountants are armed only with calculators.”