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In Search of $600 Billion: Reforming the US Internal Revenue Service

In Search of $600 Billion: Reforming the US Internal Revenue Service

The IRS wants to address the estimated $600 billion a year tax gap through massive use of data experts and a stronger focus on wealthier Americans. The measures are part of a long-term $80 billion modernization package unveiled Thursday, which also includes hiring 30,000 and revamping computer technology from the 1960s.

“The IRS will hire more data scientists than ever before to execute,” announced Deputy Treasury Secretary Wally Adeyou at the launch of the 148-page strategic operating plan. They must brief traditional tax officials with the latest methods of data analysis.

In the United States, federal and state taxes are collected separately. Congress — under Republican leadership — has spent a decade cutting the federal agency’s budget. The reform now introduced was passed last year as part of the Inflation Reduction Act (IRA) and is specifically intended to improve the IRS’s ability to conduct tax audits. The new hires are also necessary because nearly 12,000 IRS employees will retire in the next two years. According to its own data, the authority retained the equivalent of 78,661 full-time jobs in fiscal 2021, nearly 13 percent less than in 2012.

According to the bipartisan Congressional Budget Office (CBO), the modernization is expected to generate about $204 billion in additional federal revenue over the next decade. The Treasury estimates it to be as high as $400 billion, with higher amounts in subsequent years. The money is intended to help fund the IRA’s climate investments. This package is mainly known in Europe due to the planned $369 billion in subsidies. EU politics and business fear significant competitive disadvantages as a result of the measures taken by the US government.