Revamping the IRS: A Game-Changer for Tax Fairness and Clean Energy

A Washington Post photograph of the cafeteria of an IRS office in Austin, Texas, captures the scene before the Inflation Reduction Act transformed the agency by significantly investing in state capacity. 

With more resources, the IRS has cleared its backlog. Before the Inflation Reduction Act, audits disproportionately targeted the poor and working class, whose situations were simpler and access to professional help limited. Now, the agency has shifted focus to the wealthy, closing tax shelters used by the ultrarich. The IRS is now targeting the 25,000 households with annual revenue above $1 million who didn’t bother filing a tax return. By going after the wealthiest, most lawless tax cheats, the IRS is bringing in hundreds of billions of dollars without raising taxes, only by restoring fairness to the enforcement system.

The agency is now answering phone calls, digitizing documents, improving processing time, updating 40-year-old computer systems, and rolling out new systems to make paying taxes free and simple for all. Their new portal, Direct File, allowed most taxpayers in trial states in 2024 to file their taxes on irs.gov for free, bypassing the need for the tax-processing firms that lobby to make filing taxes as painful as possible. This service will be expanded to all states in 2025.

The IRS also launched Energy Credits Online, enabling any non-taxpaying entity–such as public utilities, rural electric co-ops, public schools, community or religious institutions, early-stage startups, water districts, hospitals, libraries, etc.–to quickly access unlimited, refundable clean-energy tax credits, in exchange for installing heat pumps, deploying solar, fleet electrification, and decarbonizing industrial processes. By eliminating red tape and building state capacity, the Inflation Reduction Act is crucial for the rapid deployment of clean energy. In the past, such institutions had to partner with a taxpaying business, file complicated paperwork, and pay Wall Street a cut to access the credits. Now they fill out a simple form to get their payment.

The 2025 Tax Policy Showdown

Reagan launched a global race to the bottom. While companies like AT&T and Xerox once directed their profits into R&D (giving us marvels as the transistor, the photovoltaic cell, and the desktop computer), Reagan slashed taxes on their profits and shareholders, and determined that stock buybacks were not market manipulation. Productivity growth stalled as companies invested in greed rather than the future, and the titans of American postwar industry were stripped for parts by the billionaire class. The neoliberal era spread worldwide, with companies competing not by investing in economic and care infrastructure and industrial policy… but rather by offering more and more bones for vulture capitalists to pick through. 

The Biden-Harris Administration is working to end this collective action problem through international cooperation. In 2021, the Administration, working with the G20, brokered a global deal on corporate taxation, creating a minimum rate for the first time. Tax cheats like Amazon can no longer get away without paying taxes.

Next on the agenda is a minimum tax for billionaires. The world’s 3000 billionaires are mostly able to escape taxation through financial maneuvers that allow them to treat their capital gains as revenues without realizing the capital gains. Strategies to combat this have appeared in the Biden-Harris Administration’s budgets and in the Senate Finance Committee, including tax withholding of billionaires’ capital gains and a minimum tax on billionaires. A similar proposal is now at the top of the G20 agenda. The Biden-Harris Administration, if given another term, will push for progressive tax policies both internationally and in Congress, particularly when certain healthcare funding and the individual Trump tax cuts expire next year. Five key principles underpin their efforts:

1. Reward work, not wealth. Invest in kids, healthcare, education, and higher wages instead of the ultrarich.
2. Raise revenue to honor commitments to seniors and fiscal responsibility. End Trump tax cuts on those making more than $400,000 per year.
3. Raise revenue by asking corporations making record profits to pay their fair share. The Trump tax cuts did not spark growth but deprived social programs that spur growth of vital funding.
4. Ensure wealthy taxpayers pay what they owe and play by the same rules. Invest in the capacity of the IRS to go after tax cheats while providing a better tax filing experience.
5. Avoid an international race to the bottom on tax. Foster international collaboration to crack down on tax havens and bring large corporations back under the rule of law.

Speaker Mike Johnson just reaffirmed Republicans' 2025 plans for trillion-dollar cuts to healthcare to create fiscal room for tax cuts. A Trump Administration would base tax policy on two principles:

A popular Internet meme from the 2017 debate on the American Healthcare Act.

In 2017, Republicans passed massive corporate and upper-class tax cuts. Senate rules required their being passed as budget reconciliation, meaning they had to be deficit-neutral beyond ten years. After grassroots mobilization spooked their 50th vote, John McCain, Republicans backed off on their plan to take 30 million people off health insurance to finance permanent individual upper-class tax cuts, instead passing a bill that cuts healthcare spending on the individual market, reducing coverage for an estimated 7 million people (though Democratic bills during the pandemic restored this spending through 2025).

This time they do not need legislation to pay for their massive upper-class tax cuts by taking healthcare from 24 million Americans. Via Project 2025 and the packed Supreme Court, they plan to use new executive authority to end Medicaid as we know it, transforming the Department of Health and Human Services into a “Department of Life” that will attack reproductive freedom instead of delivering healthcare.

And with full control of the government, they will make massive cuts to social spending to fund even more tax breaks for the wealthy–not just extending the Trump tax cuts, but making them even more extreme.