House GOP proposal to link IRS cuts to Israel aid draws quick, bipartisan criticism

Updated at 11:01 a.m. ET on Nov. 1, 2023.

House Republicans late Monday unveiled a plan to provide $14 billion to Israel while cutting an equal amount in planned spending on Internal Revenue Service enforcement that raises tax revenue, though by Tuesday lawmakers in both parties and chambers joined the administration in calling the plan inadequate. 

The leadership’s proposal, conceived by new House Speaker Mike Johnson, R-La., broke with President Biden’s request to combine emergency funding for Israel, Ukraine, Taiwan and the border in a $106 billion package. Instead, it isolated aid just for Israel—equaling the amount Biden requested for the country currently waging war with Gaza—and coupled it with reductions provided to IRS as part of the Inflation Reduction Act. The signature Democratic climate, health care and tax law provided IRS with $80 billion over 10 years, more than $20 billion of which was already rescinded as part of an agreement earlier this year to raise the debt ceiling. 

While Republican leadership suggested the IRS cuts would offset the spending for Israel, the provision would likely add to the deficit by reducing taxes the agency can collect. The nonpartisan Congressional Budget Office has estimated the IRS provisions of the IRA would bring in more than $100 billion in net revenue to the U.S. Treasury. 

On Wednesday, CBO estimated the IRS portion of the bill would reduce revenues by $26.8 billion over 10 years and lead to a net increase to the deficit of $12.5 billion. 

IRS leadership has for years bemoaned underfunding, which has led to significant staffing cuts and outdated technology at the agency. Current Commissioner Danny Werfel has said the funding is key to backfilling vacancies and growing the IRS workforce, keeping pace with high-income individuals and corporations that seek to avoid paying their full share of taxes and reducing the overall tax gap. 

Prior to the debt limit deal, House Republicans voted to rescind nearly all of the IRA money Congress allocated to the IRS. While the Biden administration has continued to tout its successes in using the law’s initial allocations to crack down on wealthy tax cheats, Republicans have continued to voice concerns over the funding and skepticism IRS would fulfill its pledge to not increase audit rates for those making less than $400,000 annually. Just last week, Werfel expressed optimism he could convince his detractors of the merits of his goals. 

The commissioner said he hopes to “choose the right priorities that will resonate with the American taxpayer as good things to be doing, and I hope that that would kind of cut through some of the pushback that we're getting.”

Soon after the current plan came to light, Treasury Secretary Janet Yellen said it failed to provide the resources that majorities of lawmakers in both chambers support. 

“We cannot let our national security be undermined in an attempt to weaken our efforts to modernize the IRS,” Yellen said, “efforts which reduce the deficit, improve customer service for Americans, and make sure that wealthy tax cheats pay what they owe.”

Senate Majority Leader Chuck Schumer, D-N.Y., made clear the bill cannot pass his chamber. 

“The House Republican bill is woefully inadequate and has the hard right’s fingerprints all over it,” Schumer said on Tuesday. “It makes aid for Israel, who has just faced the worst terrorist attack in its history, contingent on poison pills that reward rich tax cheats.” 

Johnson has said he will put the measure up for a vote this week, though it remains unclear if it can pass even his Republican-controlled chamber. All Democrats are likely to oppose it and multiple Republicans have said they would not support it either. In addition to the pairing with IRS cuts, many lawmakers have said they would not back the measure since it does not also include aid for Ukraine and other priorities. Rep. Joe Wilson, R-S.C., joined Rep. Brad Schneider, D-Ill., and other Democrats in writing a letter to Johnson demanding he not separate aid to the various U.S. allies. 

Senate Minority Leader Mitch McConnell, R-Ky., took a similar approach on the Senate floor on Tuesday. 

“The threats facing America and our allies are serious and they're intertwined,” McConnell said. “If we ignore that fact, we do so at our own peril.”

As part of Biden’s request, the White House asked for $13.6 billion to hire nearly 6,000 employees at the Homeland Security Department and the Justice Department. The resources would dramatically alter the workforces at several immigration-related components, which the administration said was necessary to keep the Southwest border secure and restrict the flow of fentanyl into the county.

The Senate Appropriations Committee is working on its own package based on Biden’s requests, with Chair Patty Murray, D-Wash., and Vice-Chair Susan Collins, R-Maine, saying they are hoping to release a bipartisan measure in the coming days. They held a hearing with Defense Department Secretary Lloyd Austin and State Department Secretary Antony Blinken on Tuesday to go over their requests and will host DHS Secretary Alejandro Mayorkas and Health and Human Services Department Secretary Xavier Becerra next week. 

That bill is not expected to include any cuts to IRS. Natasha Sarin, a professor at Yale Law School and former Treasury Department official who focused on shrinking the tax gap, said the House Republican position amounted to saying they would support Israel so long as it was made easier for wealthy people to cheat on their taxes. 

“Calling a rescission of those resources an offset is bonker bananas,” Sarin said. 

This story has been updated to include the most recent score from CBO.