Senator Elizabeth Warren has put forth a bill that would nearly triple the Internal Revenue Service’s budget so that the agency can chase after wealthy tax cheats and close the tax gap.

In a press release on Monday, the Massachusetts Democrat and member of the Senate Finance Committee said the bill, Restoring the IRS Act of 2021, is designed to permanently replace the IRS's base budget from the annual appropriations process with $31.5 billion in mandatory annual funding. The IRS’s 2021 base budget is $11.9 billion.

“For too long, the wealthiest Americans and big corporations have been able to use lawyers, accountants, and lobbyists to avoid paying their fair share – and budget cuts have hollowed out the IRS, so it doesn't have the resources to go after wealthy tax cheats. The IRS should have more – and more stable – resources to do its job, and my bill would do just that,” Senator Warren said.

Warren’s proposal bears a similarity to a plan President Joe Biden revealed earlier this month in which he called for an $80 billion boost in funding for the IRS over 10 years to crackdown on wealthy tax cheats. Biden has proposed increasing taxes on wealthy Americans to help pay for the proposal.

Warren cited research by the National Research Program, which found that the top 1% of Americans fail to report more than a fifth of their income on their tax returns, and they account for more than a third of all unpaid federal income tax. “This underreporting has helped drive the tax gap - the difference between taxes owed and taxes paid - to exceed an estimated $1 trillion annually,” she said.

The IRS, Warren said, has not been able to perform its core duties, especially enforcement focused on the ultra-rich, because of politically motivated budget cuts over the years. The IRS enforcement budget, she noted, has been reduced by more than 20% since 2010, and the agency has lost a third of its personnel.

“As enforcement resources have declined, so have the agency's audits of millionaires and giant corporations. Audit rates for the very wealthiest taxpayers, those with incomes over $10 million, are nearly 80% lower than they were a decade ago, while audit rates for corporations with more than $20 billion in assets have fallen by nearly half,” she said.

Warren said the mandatory ongoing funding for the IRS will ensure a steady, predictable and sustained budget.

Warren cited recent testimony by IRS Commissioner Charles Rettig, which pointed out that,  “mandatory, multiyear funding would help the IRS crackdown on wealthy tax dodgers. In addition to more funding, strengthening information reporting would help the IRS verify wealthy individuals' incomes and make it more difficult for them to hide their income.”

She also cited research in 2016 by the Treasury Department that estimated that for every $1 invested in IRS enforcement, there could be a return of $24 in additional revenue, “including a nearly $6 direct return in revenue collection, as well as an indirect deterrence effect estimated to be at least three times the direct revenue impact.”

Warren said recent analyses estimate that providing the IRS enforcement division with the resources it needs could bring in as much as $1.75 trillion over 10 years.

Additionally, Warren said her bill would improve tax compliance by:

• Requiring new third-party reporting from financial institutions to help the IRS verify tax filings for taxpayers with less visible income streams;
• Requiring the IRS to implement a plan to shift audits toward high-income, high-wealth tax filers and corporations;
• Requiring the IRS to report annually on the tax gap;
• Requiring the IRS to conduct an analysis of racial disparities;
• Increasing penalties for underpayment for taxpayers with income above $2 million; and 
• Applying the False Claims Act to misstatements on tax returns for taxpayers with income above $10 million.