Old North News

As Election Day nears, it’s important to know not only where incumbents stand on key issues, but where candidates stand, too, so you can get an idea of what they’ll support going forward.

North Carolina voters are choosing a U.S. senator next month, and Cheri Beasley (D) has voiced support for some costly bills, including the Inflation Reduction Act that, among other things, would more than double the size of the IRS, increasing the likelihood of audits on taxpayers and owners of small businesses.

The act has come under fire from Republicans because of the effect it could have on everyday Americans.

“Make no mistake: American taxpayers of all income levels should brace for more audits, investigations and tax enforcement under the massive new IRS funding increase,” Sen. Mike Crapo (R-ID) tweeted in August. “Taxpayers deserve better services, not broken promises.” 

The Inflation Reduction Act of 2022 passed with a 51-50 vote in August. All 50 Democrat senators voted for the bill and all 50 Republican senators voted against it. Vice President Kamala Harris cast the tie-breaking vote. 

The bill allocates $80 billion to the IRS. Critics of the Act say that will fund the hiring of 87,000 new IRS auditors. Beasley tweeted that she supported the Inflation Reduction Act and she criticized North Carolina’s Republican Sens. Thom Tillis and Richard Burr for voting against it. 

Americans making less than $75,000 per year will receive the majority of IRS audits, according to a Fox Business analysis. It estimates that expanding the number of IRA agents will lead to1.2 million more audits on American tax returns. Fox Business reports the focus on audits could increase revenue by $124 billion. IRS Commissioner Charles Rettig has contradicted that, saying audits would not increase as a result of the Inflation Reduction Act. 

The Washington Post’s Fact Checker says the number 87,000, by itself, "lacks significant context,” as it comes from a May 2021 Treasury report that indicates approximately $80 billion in funding would allow for hiring 86,852 new employees over the next 10 years. 

That Treasury Report says the new employees would be added in groups of 7,000-12,000 per year. They “would conduct audits, improve informational technology and enhance customer service,” the Washington Post reports.

Because the IRS has been historically underfunded, the Fact Checkers claim, that has slowed the processing of tax returns and has left the agency with underdeveloped technology.

The bill sets aside $46 billion for “enforcement,” but the Washington Post reports Treasury Officials have yet to determine the exact amount of IRS enforcement agents who will be hired. 

Additionally, more than 50% of current IRS employees are eligible to retire within the next 5 years, so the Washington Post’s Fact Checker says the IRS will grow 25-30% because of the Inflation Reduction Act, adding that the Republicans' claim that it will double in size is exaggerated. 

House Republicans, in their recently announced “Commitment to America” agenda that outlines the top priorities if they win the House in the upcoming midterms, said they will block the IRS expansion. 

“The first thing we will do when we earn back the House this November is to repeal the 87,000 IRS agents Joe Biden and House Democrats’ hired,” House Republicans tweeted. 

Regardless of how much the IRS grows, it will likely hit the working class and owners of small businesses hard. 

“There is no doubt that boosting IRS audit capabilities through a vast increase in the hiring of 87,000 new staff focused on this effort will hit small businesses the hardest,” Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council, said in an interview with the Center Square. “The tax data shows that it is small businesses of moderate means, not ‘the wealthy,’ that are targeted most frequently."  

The Center Square notes that in fiscal year 2021, the IRS had 78,661 full-time employees. 

Kerrigan says small-business owners and everyday Americans are more likely to be affected because they lack the resources to hire accountants or lawyers to respond to an IRS audit. 

“Dealing with crushing inflation and the economic downturn is unbearable enough for small business owners, without having this type of threat hanging over their heads,” Kerrigan said.

The Small Business Administration (SBA) reports that as of 2021, 964,280 small businesses make up 99.6% of total North Carolina businesses. The 1.7 million small-business employees make up 45.1% of the state’s employees. 

CBS News also reported that the IRS targets households earning $25,000 per year or less at a rate five times higher than other income classes. The CBS News article claims audits have been going down with a limited number of IRS employees, however, the article was published in March, before the Inflation Reduction Act was passed. 

"It's unbelievable, the focus and targeting on the poorest families," Susan B. Long, co-director of TRAC and a professor of managerial statistics at Syracuse said in that report. "It's five times the rate for everyone else — does this really make sense?”