IRS Funding Cut Doesn’t Offset Israel Aid in GOP Bill

House Speaker Mike Johnson cited concern about “fiscal stability” in saying that a Republican bill to provide aid for Israel would have “pay-fors in it.” But the legislation would increase the deficit, not pay for itself.

House Speaker Mike Johnson is sworn in at the U.S. Capitol on Oct. 25, after being elected as the 56th speaker in the House of Representatives. Photo by Tom Brenner/AFP via Getty Images.

The bill calls for $14.3 billion in spending to respond to the attacks in Israel and proposes “budgetary offsets” by rescinding the same amount of funding to the Internal Revenue Service. That’s not an “offset,” multiple budget experts say. Reducing the IRS’ ability to collect taxes that are owed would lower revenues and therefore increase deficits.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement about the bill that “paying for new spending by defunding tax enforcement is worse than not paying for it at all. Instead of costing $14 billion, the House bill will add upward of $30 billion to the debt. Instead of avoiding new borrowing, this plan doubles down on it.”

Johnson made his comments in an interview with Fox News. He said he hoped to hold a vote on the standalone aid package for Israel on Thursday. “We’re not just going to print money and send it overseas, because the other concern we have that is overriding this is our own strength as a nation, which is tied to our fiscal stability,” the new House speaker said in a clip host Kayleigh McEnany posted on X, formerly known as Twitter, on Oct. 30. “And that’s a big problem that we have as well. We have to keep it in mind as we try to help everyone else.”

When asked how the aid spending would be paid for, Johnson said he wanted to “take some of the money that has been set aside for … building and bulking up the IRS right now.” Indeed, that’s what the bill calls for, under a section titled “budgetary offsets.”

“It’s ridiculous to call this an offset, considering the IRS funding is projected to reduce deficits,” Steve Ellis, president of the budget watchdog group Taxpayers for Common Sense, said in a statement. “This is not a cost-saving measure; it’s a recipe for fiscal recklessness.”

The nonpartisan Congressional Budget Office estimates that rescinding the IRS funding would decrease revenues by $26.8 billion over the next 10 years, causing a net increase in deficits of $12.5 billion. That doesn’t include the budgetary impact of the Israel aid, which would increase discretionary spending by about $14.3 billion.

The Penn Wharton Budget Model estimates that reducing the IRS funding would increase deficits by $23.1 billion, a figure that also doesn’t factor in the funding to Israel.

“The country has a massive tax gap,” Ellis said, referring to the difference between what the IRS is legally owed and what it collects, “with the Treasury receiving $688 billion less than it should have for 2020-2021.” He called the House bill “a cynical ploy that risks crippling the IRS.”

MacGuineas said the House’s desire to offset the emergency spending for Israel was “welcome news,” but canceling the IRS funding doesn’t do that. “Funding the IRS to reduce the tax gap has a long history of bipartisan support and has been proposed by every President from Reagan through Biden. It is one of the few ways to raise revenue without raising taxes,” she said. “Getting into the habit of offsetting the costs of new spending and tax cuts is critical given our fiscal situation. But you can’t pay for borrowing with more borrowing.”

Johnson misleadingly portrayed the issue as a choice between spending the $14-plus billion for Israel or spending it for the IRS. “I think if you put this to the American people and they weigh the two needs, I think they’re going to say standing with Israel and protecting the innocent over there is in our national interest and is a more immediate need than IRS agents.”

Republicans have objected to the IRS funding, which was part of the Inflation Reduction Act. That law, passed in August 2022 with only the support of Democrats and independents, included about $79.6 billion in additional IRS funding. Several Republicans have falsely claimed the money would back the hiring of an additional “87,000 IRS agents” who would go after the “middle class.”

As we’ve written, the 87,000 figure is the number of employees the IRS could hire with the funding, but most hires would replace retiring or departing workers, the Treasury Department told us, and most new jobs would be in customer service. Some tax enforcers would be hired, but the focus would be auditing high-income earners, administration officials have said. 

Republicans have already clawed back some of the IRS funding included in the Inflation Reduction Act. As part of the debt limit deal reached between Democrats and Republicans in June, $1.4 billion of IRS funding for enforcement and operations support that was made available from the IRA was cut. And the White House said it had agreed to cut another $20 billion in IRS funding over the next two fiscal years.

The House GOP bill, if it passes that chamber, would not likely survive the Democratic-controlled Senate. Some Republican senators, including Minority Leader Mitch McConnell, have supported passing a bill that would include both funding to Israel and Ukraine. The White House is seeking nearly $106 billion in funding, which, in addition to $14.3 billion for Israel, includes $61.4 billion for Ukraine; $9.15 billion in humanitarian aid for Israel, Gaza and Ukraine; $7.4 billion to countries in the Indo-Pacific region to counter China; and $13.6 billion for border security.