President Biden’s nominee for commissioner of the Internal Revenue Service (IRS) promised in a committee hearing on Wednesday that, if confirmed, he would not increase audits for taxpayers making less than $400,000.
Daniel Werfel, nominated by President Joe Biden for the position on November 10, told Senate leaders that he would not pursue lower-to-middle-income households using the increased funding recently passed for the IRS.
Werfel previously served in the Bush and Obama administrations, becoming acting IRS commissioner for several months in 2013, according to a White House press release. Since leaving the government sector, Werfel has worked at Boston Consulting Group for the past nine years.
Werfel’s nomination comes after Trump-appointed commissioner Charles Rettig stepped down following the conclusion of his term.
Speaking about his past experience in government roles, Werfel testified to the Senate Committee on Finance, “I learned that the essential foundation of government is public trust.
“Public trust requires transparency, collaboration with oversight entities such as Congress, adherence to the rule of law, and responsible stewardship of taxpayer dollars,” he continued. “Public trust also requires that the government carry out its mission fairly and equitably.”
Werfel also highlighted an order from Treasury Secretary Janet Yellen which stipulated that “the IRS will not increase audit rates, relative to historic levels, for small businesses and households making under $400,000.”
Claiming that he is “committed to meeting” such a goal, Werfel added, “If I am fortunate enough to be confirmed, the audit and compliance priorities will be focused on enhancing IRS capabilities to ensure America’s highest earners comply with applicable tax laws.”
Sen. Mike Crapo (R-ID), the ranking Republican member on the Finance Committee, remarked during the hearing, “The IRS exists solely to serve taxpayers and fairly administer tax laws.”
The senator continued, “The need for an objective, consistent, and level-headed IRS Commissioner who is laser-focused on taxpayer rights is even more imperative, given the staggering $80 billion in additional funding that the misnamed ‘Inflation Reduction Act’ just gave the agency.”
Crapo further commented, “Americans—and their elected representatives—are watching. Will the IRS be honest and fully and deeply transparent?”
Some tax policy experts have expressed apprehension regarding Werfel’s promise, however, suggesting that it could inhibit the effective enforcement of tax law.
Alex Muresianu, a policy analyst for the Tax Foundation, explained to The Dallas Express, “I have some skepticism about the claim that there will be no increase in audit rates for people earning below $400,000, on an almost mechanical level.”
He continued, “Imagine someone that earned $450k, did not report $100k, and ergo, reported only $350k, below the threshold.
“But when the IRS looks at returns with under $400k in reported income, they’re not going to always get right which returns with under $400k in reported income actually have unreported income that would put them over the $400k threshold,” Muresianu noted, suggesting that such instances could cause “mechanical” issues for the IRS.
“So, big picture, that’s a case for skepticism around the exact meaning and letter of Werfel’s statements,” said Muresianu.
“It’s a much more plausible case that, say, audit rates are going to go up much more for high-income households than they will for middle-income households,” Muresianu explained, “which maybe covers the spirit of the defense of the IRS funding increase, without making a more maximalist claim about how no one making below $400k will be negatively impacted.”
“And furthermore, it’s an unnecessary constraint on the purpose of tax enforcement: certainly tax nonpayment matters everywhere, not just at the top,” he concluded.
In support of Werfel’s nomination, committee chair Ron Wyden (D-OR) claimed during the hearing, “Democrats have been clear that this funding will not go to audits of Americans who earn less than $400,000. In fact, during the debate on the bill, Republicans actually struck legislative language from the bill that would have constructed even stronger guardrails on that issue.”
He continued, “For Democrats this is about going after the cheating at the top and doing a better job of collecting what the wealthy and corporations already owe.”
Wyden concluded, “I want to thank Mr. Werfel for his willingness to return to public service and the IRS. I think the president made an excellent choice with his nomination.”
A vote on whether Werfel will be confirmed to the office has not yet been scheduled by the Senate.
