Capitol Hill Recap: Democrats on Offense on Tax Day

Another tax day came and went—and according to Internal Revenue Service CEO Frank Bisignano, it was a successful one. But Democrats in Congress say the taxpayer experience could be vastly improved.

During an April 15 hearing, where Bisignano testified before the Senate Finance Committee, Democratic members honed in on the agency’s decision to scuttle the Direct File program, which allowed taxpayers to pay taxes online directly to the IRS, rather than through third-party software. Bisignano said the program was “costly” and “duplicative” of current free filing options through the private sector, and that the increase in electronically filed returns this year, as well as the promptness in which refunds and deposits were processed, shows that taxpayers are being well-served by the current options.

Democrats begged to differ.

“Millions are frustrated that Republicans and the Trump administration specifically killed the Direct File program for the year, and put those workers back at the mercy of the tax software giants who overcharge for a service that ought to be free,” said Sen. Ron Wyden, D-Ore., the ranking Democrat on the committee.

Congress never directly authorized the Direct File program, but the Biden Administration created it in early 2024, citing executive authority as well as money that had been appropriated to test direct file options in the Inflation Reduction Act. The Trump Administration ended the program last year.

Sen. Elizabeth Warren, D-Mass., also a Finance Committee member, tried to bring up legislation to permanently reinstate the Direct File program on the House floor on Wednesday, but was blocked by Republicans.

Along with a new focus among Democrats on taking people off the tax rolls entirely, or zeroing out their tax liabilities, the party’s push on the Direct File program seems to indicate they see a lot of frustration among Americans with not only the cost but the inconvenience of paying taxes.

Recent Tax Pieces:

Trump Increased Tax Refunds, but a Political Challenge Still Looms – Andrew Duehren, The New York Times:

President Trump’s tax cuts did succeed in increasing refunds this year. The average so far is $3,462, about $350, or 11 percent, larger than a year ago, according to Internal Revenue Service data through April 3.

But that’s well below what Mr. Trump initially promised. The White House had projected that the average refund would grow by $1,000 or more, echoing some Wall Street analysts.

The increase was smaller than expected even though many Americans are taking advantage of the new tax cuts. More than 53 million people have claimed at least one of the cuts reflecting Mr. Trump’s 2024 campaign promises, which include new tax breaks on tips and overtime, along with new deductions for seniors and some auto-loan interest, according to Treasury officials.

Affordability Issues Cast Shadow Over GOP Tax Cuts – Katie Lobosco and Kelsey Brooks, Tax Notes ($):

Republicans used tax day to showcase the benefits of the massive tax bill they enacted last year, but the 11 percent average increase in refunds may not be enough to counter the rising costs Americans are facing elsewhere.

The war with Iran and the Trump administration’s sweeping tariffs have led to rising prices at the gas pump and in the grocery store, while the cost of healthcare has drawn attention from lawmakers on both sides of the aisle.

No Tax Likely in Reconciliation 2.0, GOP Leaders Say – Katie Lobosco, Tax Notes ($):

Republican leaders are eyeing a narrow funding bill to end the partial government shutdown, lowering the chances of enacting tax provisions this year through a second reconciliation package.

The bill, which House Speaker Mike Johnson, R-La., has called “skinny,” is expected to fund Immigration and Customs Enforcement and Customs and Border Protection.

“We’re going to move quickly, decisively, and hopefully in a very focused way on ensuring that those important law enforcement agencies — contrary to the Democrats’ defund law enforcement efforts — are funded not only today, but well into the future,” Senate Majority Leader John Thune, R-S.D., said at a press conference April 14.

House GOP Spending Bill Floats Cuts to IRS, SEC Funding – Chis Cioffi, Bloomberg Tax:

Democrats Thursday pounced on the GOP proposal, accusing appropriators of seeking to traumatize federal workers and promote corruption by billionaires and large corporations by making cuts to the IRS and the Securities and Exchange Commission. The bill’s $2 billion for the SEC represents a $123 million cut from last year’s funding legislation.

“This partisan bill will cost taxpayers—not only in benefits and services but also in lost revenue,” said Financial Services Appropriations Subcommittee ranking member Steny Hoyer (D-Md.) in a statement.

IRS CEO Promises Audits of Wealthy as Democrats Slam Worker Cuts – Erin Slowey, Bloomberg Tax:

While there is no widely accepted federal revenue estimate isolating the precise tax effect of ending automatic citizenship for some U.S.-born children, the direction of the economic impact appears clearer, according to immigration experts who are following the case. A larger population pushed into lower earning and less secure work would likely generate less tax revenue over time, they said.

Phillip Connor, a research fellow at Princeton University's Center for Migration and Development, said birthright citizenship has been central to allowing the children of immigrants to participate fully in the U.S. economy and move into higher-skilled work.