IRS Hiring Surge, USPS Electric Vehicle Funding and Other Takeaways From the Democrats' New Agreement

Senate Democrats on Wednesday unveiled an agreement aimed at lowering health care costs, investing in efforts to combat climate change and adjusting the tax code, marking a breakthrough in negotiations that have played out during President Biden’s entire time in office. 

The bill is significantly slimmed down from the original $3.5 trillion package Democrats first pitched last year, but still contains significant investments across several agencies. The agreement, struck after months of negotiations between Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., includes a total of $433 billion in new spending, though lawmakers estimated the revenue accompanying it would lead to a net deficit reduction of $300 billion. Democrats are looking to pass the bill in the Senate through a process called reconciliation that would not require any Republican votes.

The measure would invest $80 billion over 10 years, reviving a proposal floated since lawmakers for first floating ways to offset spending for a bipartisan infrastructure bill. It was ultimately scrapped from that bill, only for Democrats to add it back to the original reconciliation package. In the current iteration, lawmakers estimated it would raise more than $300 billion in revenue, or a net of $124 billion. That is down from the original estimate when the spending was first proposed, when lawmakers said it would bring in $700 billion in revenue. 

The cash injection is expected to provide for a massive hiring surge at IRS, which has seen its staffing levels drop precipitously since 2010. IRS has shed 17,000 enforcement workers over the last decade, for example, as well as nearly 9,000 customer service representatives. The Democratic bill would provide $3 billion for taxpayer services, $46 billion for enforcement, $25 billion for operations support and nearly $5 billion for business systems modernization. The extra funding for enforcement would only go toward taxpayers making more than $400,000 annually. 

IRS Commissioner Charles Rettig previously said boosted enforcement would focus on high net-worth individuals, large pass throughs, corporate compliance, employment tax field examinations and non-filers with virtual currency, among others. The hiring surge would also go toward customer service efforts, he said, with the goal of improving the phone answering rate to 75% of calls. 

The agency is currently facing an unprecedented backlog of tax filings and has taken drastic steps to address it, including mandating overtime for 6,000 employees and allowing for voluntary overtime for an additional 10,000 workers, deploying surge teams, bringing on contractors and going on a hiring spree aided by a hastened onboarding process authorized by Congress. Earlier this year, Rettig announced a plan to hire 10,000 new employees by the end of 2023. He told Congress in April the agency was halfway to its goal for 2022.

The new bill would further authorize direct hire authority for IRS “without regard to any notice or preference requirements, directly to positions in the competitive service.” The agency would receive permission to pay up to 500 employees special, boosted salaries. The National Taxpayer Advocate warned last year that IRS is "not equipped to handle the influx of hiring the IRS needs.”

Tony Reardon, president of the National Treasury Employees Union, praised the proposal for its potential to both crack down on tax cheats and provide better service. 

“We are extremely encouraged that there is widespread understanding in Congress that improving enforcement and customer service by hiring more trained professionals and modernizing computer systems is a surefire way to reduce the deficit, fight inflation and make the IRS a more effective and efficient agency,” Reardon said. 

Elsewhere in the bill, Democrats allocated $3 billion for the U.S. Postal Service to purchase more electric vehicles. USPS is in the process of replacing its decades-old fleet and plans to purchase 165,000 vehicles over the coming years. Postal management initially said just 10% of an initial order from its contract for custom-built trucks would be electric, causing widespread pushback from Congress, the White House and environmental advocates. Just last week, USPS announced it was upping that to 40% of the first 84,500 vehicles the agency will purchase. 

The Postal Service has not said exactly how many EVs it could purchase with the added funds, though Postmaster General Louis DeJoy has long held that he would happily buy more if Congress paid for it. At an event at the American Enterprise Institute in Washington on Wednesday, DeJoy said the agency only got as high as around 70% electric in its previous calculations when assuming a cash infusion from Congress. Ultimately, he said, his team has a deep understanding of which routes make sense for EVs and which do not. The USPS inspector general found in a report issued earlier this year USPS can viably support about 99% of its routes every day using all electric vehicles. 

“We're not dopes about, alright?” DeJoy said. “And we're not evil trying to destroy the planet.” 

Kim Frum, a USPS spokeswoman, said the agency expects the electric portion of its fleet to “evolve upward” based on changes to its operational, technological and financial circumstances. 

“We have been monitoring the interest of Congress in funding an increase in electrification and should funding be enacted we will assess the impact on our plans,” Frum said. 

The bill would invest a total $369 billion to boost energy security and fight climate change. Some agencies would receive sizable influxes to boost their staffing to carry out the provisions of the bill. The National Park Service would get $500 million to fill longstanding vacancies and up its workforce levels. The National Oceanic and Atmospheric Administration would receive $20 million and the Environmental Protection Agency $40 million to hire staff to improve their permitting processes. The Federal Energy Regulatory Commission would be allocated $100 million, the Energy Department $125 million and the Interior Department $150 million to boost its rolls for environmental reviews.