WASHINGTON ― A Republican proposal to offset the cost of U.S. aid to Israel by cutting IRS funding would backfire and actually lose billions of dollars for the government, the Congressional Budget Office said Wednesday.
House Speaker Mike Johnson (R-La.) this week introduced a bill that would pay for $14 billion worth of Israel aid by slashing the same amount from the IRS, thereby hampering tax collection efforts.
As a result, the government would miss out on $26 billion in revenue over a decade, meaning the IRS provision would increase budget deficits by $12 billion on net, while the broader bill, combining the IRS loss and the Israel aid, would cost $26 billion. Wednesday’s CBO report is in line with its previous estimates of how IRS funding affects revenue.
“Only in Washington when you cut spending do they call it an increase in the deficit,” Johnson told reporters.
Johnson’s decision to include IRS cuts in the bill seems more aimed at winning hard-line conservative votes in the House, where he has a single-digit margin majority. Johnson became speaker after Republicans ousted his predecessor, Rep. Kevin McCarthy (R-Calif.), for collaborating with Democrats.
Most Democrats have flatly rejected the idea of combining aid for Israel with IRS cuts, and the proposal has some Republican skeptics as well.
“I don’t think that if you reduce the number of tax agents then [you can] expect you get more tax revenue. I think reducing tax agents means you get less tax revenue,” Sen. Mitt Romney (R-Utah) said on Tuesday.
Republicans in the Senate are far more interested in pairing tougher border enforcement measures with any aid package for U.S. allies like Israel and Ukraine, rather than seeking to kneecap a Democratic priority that will go nowhere.
Johnson missed an opportunity to jam Senate Democrats by passing a standalone aid package for Israel without any partisan provisions. Such a bill would have put pressure on Democrats and the White House to move forward with aid to Israel without similar assistance to Ukraine, as Democrats have been demanding.
For decades Republicans have made the IRS a top bogeyman as they’ve repeatedly sought tax cuts for corporations and individuals. Many in the GOP claim that lower taxes cause economic growth that can make up for missing revenue ― a view rejected by mainstream budget experts, fiscal conservatives and Republicans’ own top tax-and-spending analysts on Capitol Hill.
“As this CBO score shows, hamstringing the IRS’s ability to take on wealthy tax cheats would result in nearly $27 billion in lost revenue, significantly increasing the deficit,” Rep. Brendan Boyle (D-Pa.), the top Democrat on the House budget committee, said in a statement. “At a time of rising tensions around the world, House Republicans have sadly chosen to play politics with critical funding for a key U.S. ally.”
Democrats boosted IRS funding last year to offset the cost of climate legislation and help close the $600 billion annual gap between what Americans owe the government and what they pay.
The House is expected to vote on its Israel bill Thursday. Republicans may pick up a few Democratic votes, but the vast majority of the Democratic caucus is expected to oppose the measure.
CLARIFICATION: A previous version of this story understated the full $26 billion estimated cost of the bill.