A few years ago, Representative Mike Johnson, now Speaker of the House, told an audience that democracy is bad. “By the way, the United States is not a democracy,” he explained. “Do you know what a democracy is? Two wolves and a sheep deciding what’s for dinner. You don’t want to be in a democracy.”
This is an extremely common view among American conservatives, who — unlike right-of-center parties in most democracies worldwide — have largely refused to accept the legitimacy of democratic decision-making over economic policy. In particular, they regard the government’s tax-and-transfer power as an abusive and illegitimate infringement on the right of rich people to keep their income.
That belief is vital to explain Johnson’s new maneuver, which is to tie any new funding for Israel to a demand to reduce IRS enforcement of wealthy people’s tax compliance.
House Republicans have framed this demand for weakening the IRS as a deficit-cutting measure. Johnson “has said the new expenditure must be covered by other spending reductions to avoid adding to the debt,” reports the Washington Post. Representative Chip Roy, a right-wing Republican, claims, “I support Israel, but I am not going to continue to go down this road where we bankrupt our country and undermine our very ability to defend ourselves, much less our allies, by continuing to write blank checks.”
But cutting IRS funding does not avoid bankrupting our country. In fact, it hastens it. IRS funding is used to increase collection of tax payments. In theory, the IRS could be funded so lavishly that additional funding does not yield any net tax revenue, but reality is nowhere close to this level.
Research suggests that every additional dollar in IRS funding yields many times more dollars in revenue, through both direct enforcement and by deterring fraud. One recent paper estimates that a dollar of funding yields $12 in revenue.
The Congressional Budget Office, which issues official budget estimates, is required by law to use far more conservative estimates of the budgetary impact of IRS funding. Even so, its conservative methods would predict the GOP plan to reduce IRS funding will increase the deficit by about $30 billion.
So Republicans are saying this is a plan to “pay for” Israel aid. But that description is close to the opposite of the truth. It’s not a pay-for, it’s an add-on. Democrats and anti-Russia Senate Republicans want to add Israel spending to spending for defending Ukraine. Johnson and the House Republicans want to take out the Ukraine spending and throw in a big handout to rich tax cheats.
Correction: This column initially misread a section of the bill as requiring CBO from estimating the budgetary effect of the IRS cuts. In fact, that section only prevents CBO from applying the savings from those spending reductions to budget caps.
Update: The Congressional Budget Office calculates Johnson’s proposal would increase the deficit by $26 billion over a decade. Johnson told reporters, “Only in Washington when you cut spending do they call it an increase in the deficit.”
That is actually not correct at all. Let me explain this with an example. Suppose a regular, non-Washington-based business discovered that its sales team had been decimated by job cuts and was bringing in far less revenue than the market could bear. So the central office hired more salespeople, and they immediately increased revenue and profits.
But then the business was taken over by a new owner, who was morally committed to the view that bringing in new revenue is evil and wrong, and decides to fire a bunch of salespeople. Presumably somebody in the office would tell him that this move would reduce profits for the business – even though it’s not in Washington.
I hope the new Speaker finds this example clarifying.
