A bill that would significantly reduce the budget of the Internal Revenue Service (IRS) has advanced in the House of Representatives, despite strong opposition from Democrats. The House Republicans have pushed through a funding bill that proposes a nearly 18% cut to the IRS for the fiscal year 2025, which amounts to a $2.2 billion reduction compared to the previous year's funding levels. The current proposed budget for the IRS stands at $10.12 billion, which contrasts with the White House's request to maintain funding at existing levels.

Democrats, including the top Democrat on the subcommittee, Rep. Steny Hoyer (D-Md.), have accused Republicans of undermining efforts to reduce deficits by cutting resources that would enable the IRS to pursue high-earning tax evaders. "This bill is going nowhere," Hoyer stated, reflecting the belief that the Democrat-controlled Senate is likely to reject such cuts, as it did with a similar proposal last year.

Subcommittee Chair David Joyce (R-Ohio) defended the bill, reminding colleagues of the $40 billion in resources allocated to the IRS through the Inflation Reduction Act of 2022, specifically for modernization and enforcement.

The bill not only reduces enforcement funding but also seeks to eliminate funding for the IRS Direct File platform, which allows taxpayers to file their federal tax returns online for free. The IRS had announced plans to make Direct File a permanent option and expand it to all 50 states and the District of Columbia in the next filing season. However, the proposed spending bill includes language that would prevent the IRS from creating a government-run tax preparation software without congressional authorization.

Treasury Department spokesperson Haris Talwar criticized the House Republican proposal, suggesting that it would "increase the deficit by allowing wealthy and corporate tax evaders to avoid paying taxes owed, while increasing costs for many American families by blocking a free IRS tax filing option funded by President Biden’s Inflation Reduction Act."

Republican lawmakers have argued that the IRS's launch of the Direct File platform without seeking congressional approval is an overreach of authority. IRS Commissioner Danny Werfel has countered this argument by stating that the IRS has the authority to provide taxpayer service and update tools for filing under the Internal Revenue Code.

The proposed spending bill also outlines a nearly 10% cut to other agencies covered under the 2025 fiscal services and general government appropriations.

Bloomberg Article