House GOP Plan To Offset Israel Aid With IRS Funding Would Expand National Debt Via Reduced Enforcement: CBO

A GOP plan to offset $14.3 billion in aid to Israel by reducing the IRS’s roughly $60 billion boost from the Inflation Reduction Act ($80 billion less negotiated cuts) would backfire and add around $30 billion to the national debt, because – according to both the CBO and the Committee for a Responsible Federal Budget (CRFB), it would reduce the amount that the agency will be able to collect via audits.

Israel, with GDP of almost half a trillion dollars and a debt-to-GDP ratio that is half of that of the United States, and a super-advanced military, still somehow needs $14.3 billion from US taxpayers in order to continue its extensive bombing campaign throughout Gaza following the October 7 Hamas terrorist attack.

While the Senate uniparty has insisted on US aid for both Israel and Ukraine (with a smattering of border security funds to mollify the America First types), House Republicans want to separate the two amid pushback from the Freedom Caucus – and pay for Israel aid by reducing the aforementioned IRS funding.

The CBO says it would decrease tax revenues by $26.7 billion, while the CFRB says it would add over $30 billion to the national debt.

Of note, the amount Congress wants to send Israel is almost precisely the amount the Trump administration wanted to secure the southern US border, which Trump said Mexico would pay for indirectly via trade deals. Instead, we’re engaged in proxy wars on at least two fronts while more than five million illegal immigrants have crossed into the United States since Biden took office.

“Paying for new spending by defunding tax enforcement is worse than not paying for it at all,” said CFRB President, Maya MacGuineas, adding “Instead of avoiding new borrowing, this plan doubles down on it.”

According to Howard Gleckman, senior Urban-Brookings Tax Policy Center fellow, said it was “pretty clear” that “cutting this kind of IRS funding would actually increase the deficit.”

“Instead of being an offset, it would actually make matters worse,” he argued. “The general rule of thumb that the budget scorekeepers use is it’s about 2-to-1. So if you cut IRS funding [by $14 billion to $15 billion], you’re actually going to increase the deficit by about $30 billion.”

Whose rule of thumb? Is there anything back that statement?

A ‘non starter’ anyway

The House is expected to vote on the proposed funding on Thursday, however Democrats say it’s a “non-starter” ion the Senate.

“If Republicans had an ounce of shame they wouldn’t condition support for Israel and Ukraine on giveaways to wealthy tax cheats. Making aid to Israel and Ukraine dependent on gutting IRS enforcement funding is an absolute nonstarter,” said Sen. Ron Wyden (D-OR), the Senate Finance Committee Chair in a Tuesday statement.

Mittens echoes neocon refrain

“I don’t think you reduce the number of IRS agents then expect that you’re going to get more tax revenue,” Sen. Mitt Romney (R-UT) told The Hill.

“I think reducing agents means less tax revenue,” he continued.

The Treasury Department said earlier this month that the U.S. borrowed $1.7 trillion in the one-year period ending in late September, a spike over the previous year that Biden officials partly attributed to low revenue.

The U.S. is currently running a $33 trillion debt, which spiked above its trend line during the pandemic as the government expanded major tax credit programs for lower earners and sent out checks to families while the economy was shut down.

As part of the Inflation Reduction Act (IRA) passed last year by Democrats, the IRS was given an additional $80 billion in funding over the subsequent 10 years. That allotment would have increased revenues by around $200 billion for a net deficit reduction of around $114 billion, according to a CBO analysis. –The Hill

Some Senate Republicans have endorsed the House measure, but acknowledge that the budgetary impact could pose a challenge.

“If you’re looking for a pay-for, which they clearly are, I think it’s as good as one as there could be,” said Sen. Kevin Cramer (R-ND).

“The challenge you’re gonna have is a CBO score.”