How Biden’s IRS Modernization Plan Is Increasing Racial Equity and Rebuilding Capacity

October 5, 2023

On September 19, 2023, the Treasury Advisory Committee on Racial Equity (TACRE) gathered to discuss ways the Treasury Department can further support and advance the work of the Biden administration in achieving a whole-of-government approach to racial equity. As the Biden administration seeks to address the social and economic challenges of our time, this historic committee has spent months engaging in thoughtful and substantive discourse on ways to center equity in that agenda.

Of course, this whole-of-government approach to race equity will necessarily involve a wide range of agencies, departments, and policy tools; one of the most exciting current opportunities to achieve this vision is through the IRS Modernization plan. Overseen by Commissioner Danny Werfel, IRS Modernization represents one of the most important, transformative shifts at the IRS in decades. After years of intentional defunding of the IRS, key government functions have been hollowed out in ways that, at times, have served to benefit private corporations at the expense of our collective well-being. This institutional disinvestment has resulted in real problems for our economy and our democracy.

Importantly, these historic IRS Modernization efforts aren’t happening in a vacuum. They’re evidence of a much larger economic policymaking shift that this administration is architecting: Bidenomics. Bidenomics itself is centrally about rebalancing power in the economy. Indeed, in outlining the three pillars of Bidenomics—making smart public investments in America, empowering workers, and promoting competition—this administration has been both explicit about calling out existing power imbalances and, critically, intentional in taking concrete policy steps to correct for them equitably.

The IRS Modernization plan is just one powerful example of this new approach to economic governance in action—and is central to its success. This administration’s renewed vision for the IRS will help shift power away from the very wealthy and corporations that have hoarded too many resources and too much influence for too long, and shift it toward low-income families and families of color who have been left at the margins. When the agency is undermined by personnel shortages, antiquated technology, and insufficient capital infrastructure, inequality worsens. Wealthy taxpayers and corporations are disproportionately more likely to benefit through reduced tax scrutiny, while individual taxpayers and families—especially those low-income and/or Black and brown—are less able to access the resources they need and are entitled to through our tax system.

Now, however, President Biden’s and Commissioner Werfel’s plan for IRS Modernization will elevate the agency to its rightful place as central to rebuilding the capacity of government to support the low-carbon, high-care economy of the future.

As just one example, the IRS’s upcoming plans for a Direct File pilot program will provide families a free tax-filing option and introduce competition into an industry where very few players have long captured such a vital part of civic participation. As such, Direct File will help individuals and families reclaim power—as well as significant amounts of time, energy, and money—and not require that they depend on private tax preparation companies that can make filing prohibitively burdensome.

As another example, Commissioner Werfel has been explicit about the need to eliminate de facto racial bias in auditing. By reorienting auditing priorities away from low-income (disproportionately Black and brown) households and toward the super-wealthy (typically white) households, IRS Modernization can help inject fairness into our system of tax administration.

The work of the Treasury Advisory Committee on Racial Equity is an important part of the Biden administration’s effort to embrace a new approach to economic governance. By centering race equity, working to rebalance power, and leveraging the full might of the federal government, this administration and TACRE’s continued work will help directly repair and redress America’s racially unjust past, and leave in its wake a fair and sustainable economy and multiracial democracy.