PATEL: Why Are Republicans Agreeing To Send Armies Of IRS Agents After American Small Businesses?

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Neil Patel Co-Founder and Publisher, The Daily Caller
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If you wanted to find the group getting the rawest deal in 2021 America, you might start with small-business owners. Many are finding themselves working 60- or 80-hour weeks just to scrape by. During the height of COVID-19, these companies were especially beaten down. Between Jan. 1, 2020, and Dec. 31, 2020, about 30% of U.S. small businesses closed, while total small-business revenue decreased by 31%, according to Economic Tracker. During the same period, the stock market boomed, and multinational corporations continued to thrive. The effects of this economic destruction are apparent in communities all over the country. Boarded-up storefronts on main streets across America are the norm.

Given this dynamic, it’s almost incomprehensible that Senate Republicans are about to help pass an infrastructure package that unleashes the IRS to collect more revenue through aggressive policing of small businesses.

PROVIDENCE, RHODE ISLAND-APRIL 08: Homes are shown boarded up on April 08, 2021 in Providence, Rhode Island. Rhode Island in 2019 ranked worst among the 50 states in the condition of its infrastructure, and consistently ranks among the bottom, with an estimated 24 percent of its roads in poor condition and 23 percent of its bridges standing structurally deficient. Looking to reshape the U.S. economy, President Joe Biden unveiled a $2-trillion jobs, infrastructure and green energy plan called the American Jobs Plan. The administration says the proposal would create tens of thousands of jobs in construction, clean energy and technology. Many economists, engineers and politicians believe that infrastructure in the U.S. lags behind China and other leading nations. (Photo by Spencer Platt/Getty Images)

PROVIDENCE, RHODE ISLAND-APRIL 08: Homes are shown boarded up on April 08, 2021 in Providence, Rhode Island. (Photo by Spencer Platt/Getty Images)

Our tax code is massively complex. Huge companies have armies of lawyers and accountants to navigate the complexity. As a result, they often pay extremely low tax rates. Small businesses do not have this advantage. A dentist in America will often end up paying higher effective taxes than a billionaire hedge fund owner. The dentist makes a good living, but when you add in education, health care and other expenses, it would be hard to call him rich. We have had major debates on how progressive the tax code should be (should the rich pay higher wages, or should we have a flat tax system, for example), but nobody outwardly advocates for a regressive tax system, where the rich pay less. That’s precisely what we have at the top end of the tax scale. People are on to it, and it’s leading to much of the political dysfunction we’re experiencing.

In the face of all this, Senate Republicans’ answer to fund the bipartisan infrastructure package is to unleash more IRS agents on small businesses to close the so-called tax gap. The tax gap is the difference between what the IRS calculates it’s owed and what is actually paid each year. The IRS claimed the gap was $600 billion in 2019. That’s a lot of money. If this were a matter of nabbing tax cheats, it would be a great solution. That’s not what we are talking about, unfortunately. The tax code’s complexity leads to confusion and inadvertent errors much more than it leads to actual fraud. (RELATED: Biden Proposes Ballooning IRS With 87,000 More Employees To Deflate Tax Fraud)

Some level of national healing is what we need more than anything else in America. In that regard, it’s refreshing to see Washington come together on an infrastructure package. Spending on actual infrastructure like roads and bridges is needed and will help America’s long-term productivity. We should not, however, pay for it by empowering a new plague of IRS agents to harass small businesses. The bipartisan infrastructure deal calls for $40 billion in new IRS funding for agents and enforcement. That’s an astronomical number that will mean thousands and thousands of new IRS agents.

The IRS as a bureaucracy has not proven worthy of greater resources and authority. Someone at the IRS recently leaked the tax returns of America’s wealthiest individuals to a news outlet, presumably to help make a case that we need higher taxes. That sort of information is never supposed to get out; it’s the ultimate breach of trust for federal officials to leak individual Americans’ private tax returns. It also wasn’t too long ago that the nonprofit tax office at the IRS under Lois Lerner was found to have delayed applications from conservative nonprofits more than they did for liberal nonprofits, presumably for ideological reasons. Using the IRS’s enormous power to tip the political scales was another massive breach of trust with the American people. (RELATED: Twitter Takes No Action Against ProPublica Story On ‘Illegal’ Tax Leaks Despite Censoring Hunter Biden Coverage)

WASHINGTON, DC - APRIL 27: The Internal Revenue Service headquarters building appeared to be mostly empty April 27, 2020 in the Federal Triangle section of Washington, DC. The IRS called about 10,000 volunteer employees back to work Monday at 10 of its mission critical locations to work on taxpayer correspondence, handling tax documents, taking telephone calls and other actions related to the tax filing season. (Photo by Chip Somodevilla/Getty Images)

WASHINGTON, DC – APRIL 27: The Internal Revenue Service headquarters building appeared to be mostly empty April 27, 2020 in the Federal Triangle section of Washington, DC. (Photo by Chip Somodevilla/Getty Images)

The IRS needs reform, not a huge new enforcement budget. The government should aggressively go after real tax cheats, but the tax-gap debate is not about cheats. It’s about a tax code that’s too complicated and expensive to navigate. If we really wanted to shrink the tax gap, we would simplify the tax code. Unleashing thousands of new IRS agents on already-hurting American small businesses is not the answer.

It’s amazing, but no longer surprising, that Washington Republicans are so unable or unwilling to read where their voters are. Increasing numbers of Republicans think Washington exists primarily to cater to huge corporate interests at the expense of individuals and small businesses. Looks like the GOP may be lining up to prove them right. If it’s possible for trust levels in political institutions to fall any further than they already have, the Senate’s Republican negotiators may have just found the key to making it happen.

Neil Patel co-founded The Daily Caller, one of America’s fastest-growing online news outlets, which regularly breaks news and distributes it to over 15 million monthly readers. Patel also co-founded The Daily Caller News Foundation, a nonprofit news company that trains journalists, produces fact-checks and conducts longer-term investigative reporting. The Daily Caller News Foundation licenses its content free of charge to over 300 news outlets, reaching potentially hundreds of millions of people per month. To find out more about Neil Patel and read features by other Creators writers and cartoonists, visit the Creators website at www.creators.com