IRS Commissioner Warns Budget Cuts Would Add to Deficit

The head of the Internal Revenue Service warned on Thursday that proposed cuts to his agency’s budget would ultimately cost the federal government more money and pushed back against accusations that he had been disregarding laws for political purposes.

The comments by the I.R.S. commissioner, Daniel Werfel, came in testimony before the House Ways and Means Committee as he approaches his first full year on the job. He has been overseeing a $60 billion overhaul of the tax collection agency. That funding, under the Inflation Reduction Act of 2022, had been scaled back from $80 billion, and Republican lawmakers are seeking further cuts.

“For every $100 million taken from the I.R.S., the deficit grows by $600 million over 10 years,” Mr. Werfel said, citing Treasury Department data.

Republicans extracted $20 billion from the I.R.S. last year when they struck a deal with Democrats to lift the debt limit. They have called for additional clawbacks during negotiations with the White House over how to pay for additional aid for Ukraine.

The threats of budget cuts have added uncertainty to the Biden administration’s plans to upgrade the technology the I.R.S. uses to process tax returns and beef up the agency’s ability to conduct audits, which Mr. Werfel has pledged will be focused on complex corporate partnerships and wealthy individuals.

Mr. Werfel said the agency had made substantial progress in the past year improving its responsiveness to taxpayers, clearing a backlog of unprocessed tax returns and taking steps to tighten security of taxpayer data after the financial information of wealthy taxpayers, including former President Donald J. Trump, were leaked in high profile security breaches.

Mr. Werfel was pressed over his management of the agency and whether he had been flouting tax laws for political purposes. Republican lawmakers expressed particular concern about his decision to delay enforcement of a contentious tax policy that would require users of digital wallets and e-commerce platforms like Venmo, PayPal and Etsy to start reporting small transactions to the I.R.S.

“I’m extremely concerned that the I.R.S. has been just a little too focused on following political directions of the Biden administration instead of fulfilling its congressionally mandated duties,” said Representative Carol Miller, a Republican of West Virginia, who accused the agency of engaging in an “illegal overreach.”

Mr. Werfel defended the delay and said that his job allowed him to carry out tax legislation so that taxpayers were not harmed by policies that could cause widespread confusion.

“I believe the I.R.S. commissioner has the authority to implement laws in a manner that ensures taxpayer rights,” he said.

For years, the I.R.S. has faced accusations that it acts with a political agenda, as well as conspiracy theories about armed agents coming to harass businesses and taxpayers.

In response to questions about weapons and stocks of ammunition that the agency possesses, Mr. Werfel said that very few I.R.S. agents used weapons and that most of the ammunition was for training purposes. The Treasury Department has said that only about 1 percent of the new agents will work in jobs that require carrying guns.

“Most I.R.S. employees are customer service reps,” Mr. Werfel said. “They’re armed only with phone headsets, and all of our accountants are armed only with calculators.”