Steny Hoyer Has Impassionated Conversation With IRS Commissioner About Audit & Enforcement Rates

4 months ago

During a House Appropriations Committee hearing on Tuesday, Rep. Steny Hoyer (D-MD) questioned Internal Revenue Service Commissioner Danny Werfel about audit and enforcement rates.

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Transcript

00:00 time. Now I would refer to Ranking Member Hoyer.

00:04 First of all, Mr. Commissioner, you were appointed by Donald Trump. Is that accurate?

00:19 No. No, I was not appointed by Donald Trump. I was appointed by President Biden.

00:25 Okay, excuse me. I got some misinformation. In any event, I'm going to make my point anyway.

00:33 Mr. Reddick, one of your predecessors, and you essentially have represented a nonpartisan,

00:41 bipartisan view of the revenue flow of the IRS and the impact on its ability to do the job that

00:50 has been given to it by the Congress of the United States. Would that be an accurate statement?

00:54 Yeah. My predecessor, Commissioner Reddick, was a significant champion for the IRS workforce and

01:01 for the dollars that we needed to get the job done. Now, unfortunately, Mr. Edwards left because I

01:12 wanted to refer to his chart. You went up and looked at it? Yeah, I couldn't see it from here.

01:17 What was the time period for that chart? Did anybody recognize it? Did you see anybody?

01:23 It talked about the start, the close of audits in 2023, if I recall. The reality is that because

01:33 of the... Some audits take months, but many audits, especially conflicts, take years. The

01:37 closeout date is very different than the inception date. Yeah. My point is, I like that chart.

01:47 That chart reflects the reality that under $400,000, if you have an audit, essentially,

01:55 on average, it's a one-to-one. You spend $5 and you save $5. You find $5 in fraud or underpayment.

02:08 If you audit a millionaire, you get 12 times the expense. You have a 12-to-one.

02:16 Now, it is interesting that in the years, in the last 10 years, we have audited many, many,

02:24 many more people under $400,000. Why? It's easy. You can conduct audits. You don't get much money

02:35 because the payments are relatively small. Because probably 90% of those, I'm just taking

02:46 that off the top of my head, don't have a thing, have every week, every bi-week, every month,

02:53 we collect their taxes. It's the corporations, it's the pass-throughs, it's the partnerships,

03:00 et cetera, et cetera, that you don't do that with, which are much larger,

03:05 which is why you have four, five, six, 12-to-one return on the audit. I want to see his,

03:15 because he makes our point. To the extent you underfund enforcement, and enforcement has been

03:23 reduced 22% from 2010 to 2019. Hopefully, we have more relevant, more recent statistics than that,

03:34 but has been reduced 22%. Returns are up 7%. That's a 39% difference there, or 29%, excuse me.

03:45 So it is not surprising that we have that $687 billion under payment. Why? Not just because,

03:53 just the cheats, or strike that, people who don't pay what they're supposed to pay,

03:59 but it is also because those who know that they're $687 billion owed, they may not ever be caught.

04:13 So not only our tax system, one of the great things about it is, it is a largely voluntary

04:18 system, one of the most voluntary in the world. I think we're now at 87% or something like that.

04:24 80, yeah.

04:25 Is that correct?

04:25 Just north of 85%.

04:26 85% in that ballpark. But frankly, to the extent we reduce enforcement, with all due respect

04:35 to all of us, if we think, well, maybe it's due, and maybe it's not, I'm not going to pay it,

04:43 and if they catch me, they catch me, and I pay it.

04:45 That's why this enforcement system is so critically important.

04:50 It's also not unusual that those who make the most are audited the less, the least.

05:02 My, my, my, isn't it nice that we don't, for all those people who give us all these big

05:08 contributions and all that sort of stuff, we won't look at you so much.

05:11 We're going to look at the little guy a lot, which is what that chart shows.

05:17 Now, I hadn't seen that chart before, and I don't know the basis, so I have to analyze it.

05:21 But the EITC, I was glad to hear you say, they don't make anything hardly.

05:30 They're scraping by, they have it tough.

05:32 And we want to really look at them. Is there fraud in the EITC? There absolutely is. Why

05:41 is there fraud in the EITC? Because human beings are participating in it.

05:45 And human beings want to try to pay as little as they, me included. But some people cheat.

05:57 And they claim they are. You don't collect much from them because they don't have much.

06:00 But that's why so much time was spent, because we want to see that little old lady who's driving

06:07 the Cadillac, coming and doing the food stamps at the grocery store.

06:10 So, Mr. Chairman, it concerns me that when people who are making a lot of money,

06:20 and very frankly, I don't know the statistics on Miss Delora's corporations,

06:25 but if 41 corporations are paying no taxes, my presumption is they're probably doing that legally.

06:30 And we make the rules, but we complain about it. But if we make the rules,

06:36 and they're following the rules, then they'll pay taxes. God bless them.

06:39 They got smart accountants, smart lawyers. God bless. I hear that. My colleagues say that all

06:46 the time. They say, okay, did they go to jail? No. Well, then they're abeying the law, our law.

06:53 And if you don't like the fact they're not paying any, don't let them have the deductions or the

06:57 look backs or whatever that they're taking. I know I've taken longer time,

07:01 but this is a critical issue for defense, for national security.

07:06 Because that's how we pay for national security, for domestic security, because that's how we pay

07:14 for it. That's how we pay for the administration of all the government through Mr. Werfel's and

07:20 his colleagues' efforts. And we need to come to grips with establishing a system where we don't

07:30 have, forget about what the figure is, let's say it's only 400 billion. Let's say we're over

07:36 extrapolating it by $250 billion. If we have a deficit, we need to be collecting everything

07:46 that is owing, not a nickel more. And on the 400,000 people on the taxes, on the property tax,

07:56 very frankly, and I come from a high property tax state, Maryland's a rich state.

08:03 But very frankly, on property taxes, you buy a $2 million home and somebody down the road

08:11 can't afford a $50,000 home, you want them to subsidize your real estate. Now, that wouldn't

08:18 be popular in my district, Mr. Chairman, I know that. It's not popular, but I take that position.

08:23 Because they want the federal government to subsidize what Ms. Torres said they voted for,

08:29 for their schools and whatever, God bless them. But don't then look around at the Maryland taxpayer

08:37 or the Kansas or Iowa taxpayer, or even the Ohio taxpayer, to subsidize what they decided

08:46 to spend money on through their property taxes. That won't be popular in my district,

08:50 but that's the way it is. Mr. Werfel, thank you very much. You got a tough job. We're going to

08:57 have a markup and I'm going to work very hard to get the money that we need as Americans, not you,

09:02 not the IRS employee. We need as Americans to fund a tax system that is fair, which means that

09:10 everybody pays their fair share. Thank you very much, Mr. Chairman.

Steny Hoyer Has Impassionated Conversation With IRS Commissioner About Audit & Enforcement Rates

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