Senator warns Trump about impact of another shutdown on tax season

Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, urged President Trump on Tuesday to accept the funding compromise on border security that a group of congressional Democrats and Republicans have proposed, or else risk delaying tax refunds.

Wyden pointed out that under the temporary three-week deal that ended the 35-day partial government shutdown late last month, funding for the IRS will be expiring on Friday. “Donald Trump may not understand how important tax refunds are to most Americans, but you can bet he’ll find out if he axes this funding agreement, causes another prolonged shutdown and keeps refunds from going out on time,” Wyden said in a statement. “We already know Trump was willing to force hundreds of thousands of federal employees and their families into financial hardship during the last shutdown. Now the question is whether he’s willing to risk hurting tens of millions of working people anticipating tax refunds in order to look tough at campaign rallies talking about his wall.”

Senator Ron Wyden
Senator Ron Wyden, a Democrat from Oregon

President Trump is reportedly still wavering on the bipartisan spending agreement announced Monday night. A bipartisan group of lawmakers reached a compromise on providing $1.375 billion for new fencing along the U.S.-Mexico border, as opposed to the $5.7 billion the president has demanded for a wall. Democrats have dropped their demand for limiting the number of beds for detainees arrested by border agents, a disagreement that emerged as a sticking point in recent days and temporarily derailed talks over the weekend.

“I can’t say I’m happy,” Trump responded to reporters Tuesday when asked what he thought of the funding compromise. But Trump also appeared to indicate that another government shutdown would be avoided. “I don’t think you’re going to see another shutdown,” he added.

Wyden noted that the IRS has experienced a slow start since the government reopened right before tax season. The first batch of filing season data released Friday by the IRS showed decreases in the number of tax returns processed and the average dollar amount refunded (see IRS reports decline in refunds and filings during first week of tax season).

The IRS was able to process 13,306,000 returns for the week ending Feb. 1, 2019, compared to 17,931,000 in the first week of last year’s filing season, a 25.8 percent drop. The IRS also reported a decline in the number and dollar amount of tax refunds, with 4,672,000 tax refunds paid in the first week this year, compared to 6,171,000 refunds last year, a 24.3 percent drop. The average refund amount also declined, from $2,035 to $1,865, an 8.4 percent drop. The difference was even starker in terms of the total dollar amount of refunds, plummeting from $12.560 billion to $8.713 billion, a 30.6 percent tumble.

Rep. Kevin Brady, R-Texas, the ranking Republican on the House Ways and Means Committee, who spearheaded the new tax law through Congress at the end of 2017, defended the impact on refunds early in tax season and contrasted it with the tax cuts that showed up in regular paychecks last year.

“Tax refunds, the amount of that, simply means how much you didn’t have in your paycheck last year,” he said Tuesday on the Fox Business Network. “If you are living paycheck-to-paycheck like most families, you want that tax relief every month, you don’t want it a year later – which is what refunds represent.”

On the matter of another possible shutdown, Wyden pointed out that more than half of the employees IRS recalled during the shutdown before the start of filing season didn’t report to work. He warned another shutdown could lead to more staffing shortages and pose a serious threat to agency operations, further delaying tax refunds.

National Taxpayer Advocate Nina Olson documented the negative impact of the partial government shutdown in her annual report to Congress Tuesday (see Taxpayer Advocate sees continuing impact on IRS from shutdown). During the first week of last year’s filing season, the IRS answered 86 percent of calls routed to an Accounts Management telephone assistor, and the average wait time was about four minutes. During the first week of this year’s filing season, the IRS answered only 48 percent of its calls, and the average wait time was 17 minutes.

The National Treasury Employees Union, which represents IRS employees, also warned against another shutdown and pointed to the National Taxpayer Advocate’s report.

“Today’s report brings into sharp relief just how difficult it is for an underfunded, understaffed agency to function at a high level when most of its workforce was locked out for a month before the start of the filing season,” said NTEU national president Tony Reardon in a statement Tuesday. “I don’t know how anyone can read this report and not be alarmed at the massive amount of damage that has been done to the agency’s workforce and the taxpayers they want to serve.”

He noted that on the day before the shutdown ended, the IRS had more than 5 million pieces of mail waiting to be "batched," 80,000 responses to audits that needed to be addressed, and 87,000 amended returns that had not been processed.

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