The debt ceiling deal reached by President Biden and Speaker Kevin McCarthy slashed an astonishing $136 billion in nondefense discretionary from the federal budget. Pulling largely from social safety net services, President Biden’s student loan repayment forgiveness was dragged to a halt and new work requirements were created for older adults to be eligible for Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families Program (TANF) benefits. These policies undoubtedly put lower-income families in a vulnerable economic position and will be detrimental to communities of color. Similarly devastating to underserved communities is the deal’s massive claw backs on Internal Revenue Service (IRS) funding. 

The debt ceiling agreement resulted in $21 billion being rescinded from the $80 billion infusion the IRS received as a result of the Inflation Reduction Act (IRA), aiming to update and refresh the desperately outdated IRS operations and technology. Pulling out a quarter of the much needed, incredibly recent and hard-fought funding the IRS received came as an attempt to ameliorate deficits in the federal budget, but when examined further, will actually be rather injurious to the United States economy in the long run. 

In the past decade, the IRS budget fell by approximately 20%. With limited resources and funding to adequately pay employees, they experienced a dramatic downturn in staffing. Knowledgeable and specialized auditors have dwindled, and coupled with its tremendously outdated technology, the IRS simply does not have the proper resources to be directly supportive to low-income taxpayers and communities of color. For example, many of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) payments that are so essential to sustaining the quality of life for many low-income households and families of color are simply not disseminated to qualifying households – for no reason other than the IRS being underfunded. This lack of funding has also worked in the favor of wealthy households and corporations that dodge their taxes, as the lack of proper staffing allows them to slip through the cracks. These unpaid taxes have resulted in over half a trillion dollars of missing tax revenue – revenue that could support services like childcare and housing that low-income families need.  In attempting to make up for this lost revenue, low-income families and families of color are often targeted, as they are easier and less expensive to audit than wealthy families. 

Altogether, the cumulative effects of the severe lack of funding of the IRS fall largely on lower--income households and households of color, particularly Black tax filers. To combat this, the IRA was signed into law in August 2022 for the purpose of sharply increasing the funding that the IRS so desperately needed with the goal of creating a more just and equitable tax system that works for taxpayers and families of all socioeconomic and racial backgrounds. The IRS had aimed to use this funding to properly distribute tax credits like the CTC and EITC, and to correctly and consistently audit the wealthy individuals and corporations that had been finding ways around tax payments. This increase in auditing would not only support the most marginalized low-income families and families of color who have been cheated and targeted by the tax system, but would benefit the federal government as well – the return on just one extra dollar spent towards auditing those in the top 10% of income distribution would be 12 dollars back. 

An easily accessible, properly funded tax system has the potential to be immeasurably valuable in creating racial and economic equality. A fully funded IRS means consistent and reliable payments for families, and fair and equitable taxing across socioeconomic groups. If we hope for any chance at a just and equitable tax system Congress must stop drawing from IRS funding at first sight of economic distress and must continue to provide the IRS with the base funding it receives each year along with the IRA’s funds, specifically by reinstating the $21 billion lost in the debt ceiling deal. In the meantime, we can dedicate ourselves to supporting the Volunteer Income Tax Assistance program (VITA), a program that aids low-income families in filing taxes and receiving credits like the CTC and EITC, fighting for the expansion of these tax credits, and dispelling inaccurate and misinformed notions of the IRS as corrupt or unjust that Republican members of Congress have spread.