California millionaires and billionaires ready to face the full scrutiny firepower of a revamped Internal Revenue Service can breathe a little easier thanks to congressional Republicans.

This week, President Biden signed a bill that would pass $

2

1 billion from a planned $80 billion increase in agency funding, a key demand from the GOP as part of the bipartisan deal to lift the federal debt ceiling.

The controls that

would have been financed

new money

would have financed

could have hit wealthy Californians hard. About half of the $80 billion would have been spent increasing tax liability among Americans with incomes over $400,000 a year, with the rest of the money going to improve taxpayer services and modernize the archaic technologies. California, which has more millionaire households and more billionaires than any other state and holds 17% of the nation’s wealth despite having only 12% of the population, should face an inordinate amount of new enforcement action.

These cuts are great news for wealthy tax evaders and bad news for the rest of us, Vanessa Williamson, a senior fellow at Brookings, a Washington-based public policy think tank, wrote in an email.

IRS cutbacks are likely to reduce government revenues by $2.3 billion over the next 10 years, creating a

check? cq

spike in the federal deficit, according to a report from the nonpartisan Congressional Budget Office.

That money instead stays in the pockets of wealthy Americans. Without adequate enforcement funding, state officials struggled to collect taxes from the super-rich, explains Joe Hughes, a federal policy analyst for the Institute on Taxation and Economic Policy. Many wealthy households’ filings are complicated, and auditors must navigate “massively complex corporate entities” with hundreds or thousands of sub-entities.

“That’s a puzzle that’s very difficult for an IRS agent to put together,” Hughes said.

Some experts argue that spending more money on wealthy Americans’ taxes is wasted energy.

“High-income payers are more likely to receive expert tax advice and so are less likely to make mistakes,” wrote Chris Edwards, a policy scientist at the libertarian Cato Institute, in congressional testimony urging lawmakers not to spend money.

so much

money in additional tax collection as part of the debt ceiling agreement. “More aggressive IRS enforcement would increase costs to taxpayers because they would invest more time and energy defending themselves.”

According to a recent estimate, Americans alone spend about $14.4 billion a year on tax preparation services.

But the struggle to collect the taxes

That

the wealthiest Americans are especially fierce in California, a hot spot for some author and Oscar Mayer heir Chuck Collins

to call to action

the wealth protection industry, the complex of law, accounting, and money management firms that keep the wealthiest Americans that way. The government has been “completely outsmarted,” argues Collins, who gave away his fortune at age 26 and is now a senior scholar at the Institute for Policy Studies, a progressive think tank based in Washington

DC

.

Heirs of J. Paul Getty, the oilman who amassed one of California’s most famous fortunes, maneuvered their wealth in an effort to limit the amount of taxes they paid, the New Yorker reported in January. Kendalle and Sarah Getty, according to the magazine, attempted to convince tax collectors that they were not living in the Golden State or doing business to evade state taxes. Getty’s trusts were established in California, but Kendalle and Sarah’s trust moved to Nevada. Robert Leberman, a trustee of the Gettys’ trust, told the magazine at the time of publication that the family planned to meet all tax obligations.

California’s tax collection agency, the Franchise Tax Board, lacks the expertise to keep up with those kinds of innovations in the industry, Collins said. That would require a fully funded IRS, he said.

California has a tax base that is incredibly volatile, so we are at the mercy of high net worth individuals, Los Angeles Representative Sydney Kamlager-Dove said,

a democrat

who voted against the president’s deal with the Republicans. And now, on top of that, we couple that with crippling the federal government’s ability to go after them to make sure they pay what they owe.

However, Republicans have voted to continue cutting funding for the agency.

We wouldn’t stop until the rest of the IRS agents are repealed, House Speaker Kevin McCarthy (R-Bakersfield) told reporters in a triumphant speech after the House passed the bill that partially repealed the new funding. I promise you I will be back next year and next year and next year. Because I think the government should be there to help you not go after you.

Now the tax authorities have entered a state of uncertainty. In the short term, the bill came back to $1.4 billion already allocated to the agency; it also asks lawmakers to redirect $20 billion to other non-defense spending programs over the next two years. Proponents of IRS funding increases say Democrats must fight to keep the dollars alive, especially since the agency has only recently emerged from a decade of devastating austerity. The IRS budget fell by $2 billion from 2010 to 2017, a loss that

alternately

cut government revenues by tens of billions of dollars, according to an estimate by ProPublica.

Without clear indicators of where the funding stands, the IRS has little incentive to crack down, said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. After all, next year’s funding is uncertain, especially given that Republicans have made it a priority to continue pushing for additional spending cuts. That uncertainty is compounded by the fact that there have been cuts less than a year after the original $80 billion was given to the agency, she added.

Nine months later, you’re already seeing a 27% reduction from that $80 billion in funding, Holtzblatt said. Is there any guarantee that Congress won’t come back and cut funding again? From a management perspective, that kind of uncertainty can dampen enthusiasm to hire additional staff and invest in technology.

The fate of the IRS will ultimately be tied to the fate of the Democrats to control Congress. Representative Adam

B.

Schiff (D-Burbank) said if his party succeeds in taking back the House in 2024, the tone of government spending negotiations could change, with IRS funding extensions back on the table.

Schiff has his own hunch that while the IRS is going up against the ultra-rich, the ultra-rich are going up against the IRS. In America, tax avoidance is a dual pastime. But Schiff argued that Republicans in particular are at the mercy of ultra-wealthy donors, and those donors don’t want to be controlled.

If you don’t fund the IRS, as Republicans try to do, it helps their wealthy and corporate donors across the country, Schiff said. And that’s really what they’re all about.”