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U.S. Debt on Pace to Top $56 Trillion Over Next 10 Years

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Congressional Budget Office projections released on Tuesday show a grim fiscal backdrop ahead of tax and debt limit fights.The United States is on a pace to add trillions of dollars to its national debt over the next decade, borrowing money more quickly than previously expected, at a time when big legislative fights loom over taxes and spending.The Congressional Budget Office said on Tuesday that the U.S. national debt is poised to top $56 trillion by 2034, as rising spending and interest expenses outpace tax revenues. The mounting costs of Social Security and Medicare continue to weigh on the nation’s finances, along with rising interest rates, which have made it more costly for the federal government to borrow huge sums of money.As a result, the United States is expected to continue running large budget deficits, which are the gap between what America spends and what it receives through taxes and other revenue. The budget deficit in 2024 is projected to be $1.9 trillion, up from a forecast earlier this year of $1.6 trillion. Over the next 10 years, the annual deficit is projected to swell to $2.9 trillion. As a share of the economy, debt held by the public in 2034 will be 122 percent of gross domestic product, up from 99 percent in 2024.The new projections come as lawmakers are gearing up for a big tax and spending battle. Most of the 2017 Trump tax cuts will expire in 2025, forcing lawmakers to decide whether to renew them and, if so, how to pay for them. The United States will also again have to deal with a statutory cap on how much it can borrow. Congress agreed last year to suspend the debt limit and allow the federal government to keep borrowing until next January.Those fights over tax and spending will be taking place at a time when the country’s fiscal backdrop is increasingly grim. An aging population continues to weigh on America’s old-age and retirement programs, which are facing long-term shortfalls that could result in reduced retirement and medical benefits.Both Democrats and Republicans expressed concern about the national debt as inflation and interest rates soared over the last few years, but spending has been difficult to corral. The C.B.O. report assumes that the 2017 tax cuts are not extended, but that is highly unlikely. President Biden has said he will extend some of the tax cuts, including those for low- and middle-income earners, and former President Donald J. Trump has said he will extend all of them if he wins in November. Fully extending the tax cuts could cost around about $5 trillion over 10 years.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    How Trump’s Justice Dept. Derailed an Investigation of a Major Company

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    The industrial giant Caterpillar hired William Barr and other lawyers to defuse a federal criminal investigation of alleged tax dodges.In December 2018, a team of federal law enforcement agents flew to Amsterdam to interview a witness in a yearslong criminal investigation into Caterpillar, which had avoided billions of dollars of income taxes by shifting profits to a Swiss subsidiary.A few hours before the interview was set to begin, the agents were startled to hear that the Justice Department was telling them to cancel the long-planned meeting.The interview was never rescheduled, and the investigation would limp along for another few years before culminating, in late 2022, with a victory for Caterpillar. The Internal Revenue Service told the giant industrial company to pay less than a quarter of the back taxes the government once claimed that Caterpillar owed and did not impose any penalties. The criminal investigation was closed without charges being filed — and even without agents having the chance to review records seized from the company.Caterpillar appears to have defused the investigation at least in part by deploying a type of raw legal power that rarely becomes publicly visible. This account is based on interviews with people familiar with the investigation, regulatory filings and internal Justice Department emails provided to Senate investigators and reviewed by The New York Times.In the months leading up to the canceled interview in the Netherlands, Caterpillar had enlisted a small group of well-connected lawyers to plead the company’s case. Chief among those was William P. Barr, who had served as attorney general in the George H.W. Bush administration.Richard Zuckerman, the Justice Department’s top tax official, stopped an investigation into Caterpillar after meeting with its lawyers.Jerry ZolynskyWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    I.R.S. Unveils $80 Billion Plan to Overhaul Tax Collection

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    The 10-year strategy document outlines a focus on improving customer service and cracking down on tax evasion by corporations and the wealthy.WASHINGTON — The Internal Revenue Service on Thursday unveiled an $80 billion plan to transform itself into a “digital first” tax collector focused on customer service and cracking down on wealthy tax evaders. The move lays the groundwork for an ambitious 10-year overhaul of one of the most scrutinized arms of the federal government.The effort is a key part of President Biden’s economic agenda, which aims to reduce the nation’s $7 trillion of uncollected tax revenue and use the funds to combat climate change, curb prescription drug prices and pay for other initiatives prized by Democrats.The plan is also at the heart of the White House’s goal of making tax administration fairer. The report indicates that more than half the new money will be dedicated to ensuring that rich investors and large corporations cannot avoid paying the taxes that they owe.The $80 billion is the largest single infusion of funds in the agency’s history and was included in the Inflation Reduction Act, the sweeping climate and energy legislation that Democrats pushed through last year.According to the Biden administration, the investment will yield hundreds of billions of dollars in deficit reduction. But efforts to bolster the I.R.S. have drawn strong opposition from Republicans, who have long accused the agency of improperly targeting them.The report released Thursday was requested by Treasury Secretary Janet L. Yellen, whose department oversees the tax agency.In a memorandum to Ms. Yellen that accompanied the report, Daniel I. Werfel, the new I.R.S. commissioner, said he would focus new enforcement resources on “hiring the accountants, attorneys and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe.”Daniel I. Werfel, the new I.R.S. commissioner, said the agency’s staff expansion would aim to improve its ability to collect unpaid taxes from the wealthy and big corporations.Shuran Huang for The New York TimesThe I.R.S. has about 80,000 full-time employees, about 20 percent fewer than it had in 2010 even though the U.S. population is now larger and the tax system more complex. The agency’s resources have also declined over the years, as Republicans have sought to cut its funding and, in some cases, called for its abolition. The financial strain has led to backlogs of tax filings, delayed refunds, long waits for taxpayers who call the agency with questions and plunging audit rates.In recent months, the I.R.S. has ramped up hiring to improve its customer service capacity and has been racing to complete the processing of old tax returns, most of which were filed on paper rather than electronically.The plan released on Thursday details how the I.R.S. intends to become a “digital first” organization that provides “world class” service to taxpayers. That includes the replacement of antiquated technology and the introduction of systems that will allow taxpayers greater access to their financial information, easier communication with the I.R.S. and new ways to correct errors as returns are being filed.The most sweeping and politically sensitive changes involve enforcement. The I.R.S. plans to introduce more data analytics and machine-learning technology to better detect cheating, and it aims to bolster its teams of revenue agents and tax attorneys so that the agency is not overwhelmed when auditing complicated business partnerships or corporations.The I.R.S. plan repeatedly emphasizes that it will honor Ms. Yellen’s directive that the new money not be aimed at increasing audit rates for taxpayers who earn less than $400,000 a year — a pledge meant to align with Mr. Biden’s promise not to raise taxes on low- and middle-income Americans. The plan echoes Ms. Yellen’s assurance that those audit rates will not rise above “historical levels,” but does not specify the levels, suggesting that audit rates could rise above their existing levels.In a briefing for reporters on Thursday, however, Mr. Werfel said that in the near term, audit rates for those making less than $400,000 would not rise.“We have years of work ahead of us, where we will be 100 percent focused on building capacity for higher-income individuals and corporations,” he said.But Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, said it would be a challenge for the I.R.S. to determine whether taxpayers reporting an income under $400,000 were doing so legitimately, without being able to audit some of them initially. Ultimately, she said, the agency will need to decide on an acceptable audit rate for people under that income level.Mr. Werfel acknowledged that the I.R.S. would have to be alert in instances when taxpayers earn, for example, $5 million in a given year and $399,000 a year later.“We might take a second look at that,” he said.The plan lays out benchmarks for many of its goals, but it leaves unanswered questions.The I.R.S. is in the midst of a $15 million study to determine if it can create its own system enabling more taxpayers to file their federal returns online at no cost. This idea has met resistance from lobbying groups representing the tax preparation industry.The agency has faced criticism this year after the publication of a study that showed Black taxpayers are at least three times as likely as other taxpayers to face I.R.S. audits, even after the study accounted for the differences in the types of returns that each group is most likely to file. The plan includes using data to support “equity analyses” and says a key project will be developing procedures to evaluate the fairness of I.R.S. systems.The Treasury Department said earlier that the investment in the I.R.S. would lead to the hiring of 87,000 employees over 10 years, and has suggested that with anticipated attrition its head count could top 110,000 by the end of the decade. But the operating plan does not give an estimate for the agency’s eventual head count, and Wally Adeyemo, the deputy Treasury secretary, said on Thursday that I.R.S. did not want to be “locked in” to long-term hiring requirements before learning how new technology would affect its staffing needs.Mr. Werfel batted down claims by Republican lawmakers that the I.R.S. would be hiring thousands of armed “agents” to scrutinize middle-class taxpayers and small businesses. He said that only 3 percent of the I.R.S. work force was in the criminal investigations division, which has access to weapons, and that there were no plans to increase that percentage. The plan projects that the I.R.S. will hire more than 7,000 new enforcement employees over the next two years.Despite efforts to focus on technology and taxpayers services, the plan is likely to stoke criticism.Erin M. Collins, the national taxpayer advocate, wrote in a blog post on Thursday that the plan had the potential to transform tax administration but that the money was disproportionately invested in enforcement.“I believe Congress should reallocate I.R.S. funding to achieve a better balance with taxpayer service needs and IT modernization,” Ms. Collins, who serves as a watchdog for the I.R.S., wrote.The report notes that if the agency’s annual funding is curtailed over the coming years, some of the $80 billion might be needed to maintain its basic operations. That would force the I.R.S. to scale back its overhaul.House Republicans in January voted to pare the allocation, and Republican reaction to the report on Thursday indicated that the political fight over the I.R.S. will only intensify.“The Democrats are further weaponizing the most-feared agency in all of the federal government: the IRS,” Representative Mike Kelly, Republican of Pennsylvania and a member of the House Ways and Means Committee, said on Twitter. “Make no mistake — we are using money from hardworking American taxpayers to go after hardworking American taxpayers.”Former Gov. Nikki Haley of South Carolina, a candidate for the Republican presidential nomination, said on Twitter, “Does anyone believe the IRS won’t go after middle America?” More

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    Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible

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    Despite Republican claims, the new legislation would be only a modest corporate tax increase, Congress’s Joint Committee on Taxation found.After more than a year of trying — and failing — to pack much of President Biden’s domestic agenda into a single tax-and-spend bill, Democrats appear to have finally found a winning combination. They’ve scrapped most of the president’s plans, dialed down the cost and focused on climate change, health care and a lower budget deficit.As soon as party leaders announced that new bill last week, Republicans began attacking it in familiar terms. They called it a giant tax increase and a foolish expansion of government spending, which they alleged would hurt an economy reeling from rapid inflation.But outside estimates suggest the bill would not cement a giant tax increase or result in profligate federal spending.An analysis by the Joint Committee on Taxation, a congressional nonpartisan scorekeeper for tax legislation, suggests that the bill would raise about $70 billion over 10 years. But the increase would be front-loaded: By 2027, the bill would actually amount to a net tax cut each year, as new credits and other incentives for low-emission energy sources outweighed a new minimum tax on some large corporations.That analysis, along with a broader estimate of the bill’s provisions from the nonpartisan Committee for a Responsible Federal Budget, suggests that the legislation, if passed, would only modestly add to federal spending over the next 10 years. By the end of the decade, the bill would be reducing federal spending, compared with what is scheduled to happen if it does not become law.And because the bill also includes measures to empower the Internal Revenue Service to crack down on corporations and high-earning individuals who evade taxes, it is projected to reduce the federal budget deficit over a decade by about $300 billion.Adding up the headline cost for what Democrats are calling the Inflation Reduction Act is more complicated than it was for many previous tax or spending measures that lawmakers approved. The bill blends tax increases and tax credits, just as Republicans did when they passed President Donald J. Trump’s signature tax package in 2017. But it also includes a spending increase meant to boost tax revenues and a spending cut meant to put more money in consumers’ pockets.Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said the composition of the deal was vastly different from a larger bill that Democrats failed to push through the Senate in the fall. It included several spending programs that were set to expire after a few years, and budget hawks warned that the overall package would add heavily to federal debt if those programs were eventually made permanent, as Washington has been known to do, without offsetting tax increases.Ms. MacGuineas called the original idea, known as Build Back Better, “a massive gimmicky budget buster.” She had kinder words for the new package, saying it “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes.”“That is a pretty monumental improvement,” she added.The bill springs from an agreement between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin III of West Virginia, a key centrist Democrat. President Biden blessed it last week, and it carries what remains of what was once his $4 trillion domestic agenda.Understand What Happened to Biden’s Domestic AgendaCard 1 of 7‘Build Back Better.’ More

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    Here's President Biden's Infrastructure and Families Plan, in One Chart

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    Money directed at families is added to an earlier proposal on infrastructure.President Biden released the second portion of his economic plan on Wednesday: $1.8 trillion in new spending and tax cuts over 10 years for workers, families and children. That’s on top of the $2.3 trillion infrastructure plan he released at the end of March. Together, here’s what’s included: More

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    Biden’s $4 Trillion Economic Plan, in One Chart

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    Money directed at families is added to an earlier proposal on infrastructure.President Biden released the second portion of his economic plan on Wednesday: $1.8 trillion in new spending and tax cuts over 10 years for workers, families and children. That’s on top of the $2.3 trillion infrastructure plan he released at the end of March. Together, here’s what’s included: More