EXCLUSIVE: Republicans heavily criticized the Biden administration in response to its plan to increase scrutiny on service industry workers' tips.

Earlier this week, the Internal Revenue Service (IRS) proposed a revenue procedure to "improve tip reporting compliance," reduce administrative burdens and provide more transparency and certainty to taxpayers. As part of the program, which wouldn't go into effect until after a multi-month public comment period, the IRS could withdraw liability protection related to "rules that define tips as part of an employee's pay" from employers that don't cooperate.

On Tuesday evening, an IRS official told Fox News Digital that the proposal wasn't about the "auditing of servers." However, Mike Palicz, federal affairs manager at Americans for Tax Reform, said in an interview that the agency's "goal is to go and grab as much revenue as possible and from whoever they can."

"Washington has a spending problem, not a revenue problem," Rep. Mike Kelly, R-Pa., the chairman of the Ways and Means Subcommittee on Tax, told Fox News Digital on Wednesday. "Now, the IRS is going after middle-income families and working moms and dads who are just trying to make ends meet and put food on the table." 

"My colleagues and I have warned for months that the IRS would start targeting hardworking Americans in the Biden administration’s quest for more taxpayer dollars. Now, we’re starting to see some of these concerns come to fruition," he added.


President Joe Biden (R) gives Sen. Joe Manchin (D-WV) (L) the pen he used to sign The Inflation Reduction Act

President Joe Biden signs the Inflation Reduction Act, which boosted funding for the Internal Revenue Service. (Drew Angerer/Getty Images)

Rep. Adrian Smith, R-Neb., another senior member of the House Ways and Means Committee, echoed Kelly's comments, saying the plan was the latest example of the Biden administration targeting working families via tax policy. He also said the GOP was prepared to be a check on the IRS's programs.

"Bank surveillance efforts, 1099-Ks, 87,000 new IRS agents to target taxpayers, and now a new program to go after service industry workers’ tips are all a direct result of the Biden administration’s desire to tax working families and small businesses as much as possible," Smith told Fox News Digital. "Make no mistake: the administration’s many attempts at raising revenue are because they are unwilling to come to the table to address the debt crisis, which would require curbing their spending addiction." 

"The days of one-party rule are over, and House Republicans will use our majority to ensure hardworking families are not subject to higher taxes and more government mandates, especially not as they struggle under soaring inflation," the Nebraska lawmaker added. "Accountability is here – the Biden administration has some explaining to do."


In January, Smith and Rep. Michelle Steel, R-Calif., another GOP member of the Ways and Means Committee, introduced legislation that would rescind $70 billion of additional IRS funding that was green-lit in the Inflation Reduction Act. Republicans and tax reform groups expressed concerns months earlier that the act, which boosted IRS funding by $80 billion overall, would lead to increased audits of lower and middle-income Americans.

The legislation – the Family and Small Business Taxpayer Protection Act – was quickly passed, making it one of the first legislative actions Republicans took since taking majority control of the House.

Rep. Adrian Smith, R-Neb., participates in the House Ways and Means Committee organizing meeting in the Longworth House Office Building on Tuesday, January 31, 2023. (Bill Clark/CQ-Roll Call, Inc via Getty Images)

Rep. Adrian Smith participates in a House Ways and Means Committee organizing meeting on Jan. 31. (Bill Clark/CQ-Roll Call, Inc via Getty Images))

"When the IRS comes after you, it’s not voluntary," Steel told Fox News Digital. "Families across the country are struggling with record inflation and fighting to make ends meet. The last thing waitresses and waiters need is to be targeted by their own government."

"The House’s first order of business this year was to pass my bill to defund President Biden’s army of 87,000 IRS agents that were ready to increase audits on middle- and lower-income American families," Steel continued. "This new rule doesn’t add up with President Biden’s claim that he will never come after anyone earning less than $400,000 a year. I strongly oppose this proposed rule and I urge President Biden to reverse course immediately."


Smith, Steel and other critics of the Inflation Reduction Act have particularly highlighted that new funding for the IRS could result in tens of thousands of new tax agents hounding Americans.

While IRS Commissioner Charles Rettig has responded to such criticism, saying the agency intended to only use its extra resources to target higher-income individuals and large businesses, Republicans said the proposed tip rule proved the agency would continue cracking down on lower-income Americans.

IRS commissioner Charles Rettig

Commissioner of the Internal Revenue Service Charles Rettig testifies before the Senate Finance Committee on April 7. (Kevin Dietsch/Getty Images)

"The IRS’s new army of auditors has its fingers in the tip jar of hardworking waiters and waitresses," Sen. Joni Ernst, R-Iowa, tweeted. "Here’s my tip for the IRS: Make the tax evaders on your own staff pay their tax bills because my audit of the IRS is underway!"

"When Biden promised the 87k new IRS agents would only target the rich, he wasn't telling the truth," Sen. Tom Cotton, R-Ark., added.


Other Republicans said they wanted more information about the tip proposal, but feared that it signaled a willingness to continue going after those earning less than $400,000 per year.

"It’s currently the law for tipped employees to report their cash tips, so I’d like to see some more information from the IRS as to what this new policy may look like," Rep. Kevin Hern, R-Okla., the chairman of the Republican Study Committee, told Fox News Digital. "Is the Biden administration going to make things simpler for single moms working multiple shifts, or are they going to put more of a compliance burden on them?" 

"My fear is that the IRS is about to ramp up audits on everyday Americans – which I've been concerned about from the beginning, and the CBO confirmed it as well," he continued. "Those 87,000 new IRS agents clearly aren’t going after people making over $400,000, they’re going to go after hardworking Americans."