Article Summary –
Staffing cuts at the IRS, initiated by the Trump administration and supported by congressional Republicans, are expected to facilitate tax evasion by wealthy individuals, leading to billion-dollar revenue losses for the government, increased audits of working Americans, and worsened customer service. Despite efforts by President Biden’s administration to modernize the IRS with $80 billion in funding through the Inflation Reduction Act, subsequent legislative actions have reversed these advancements, resulting in significant workforce reductions and projected lost revenue of up to $65.8 billion over the next decade. The cuts are likely to exacerbate financial strain on the federal government, potentially necessitating cuts to safety-net programs or increased national debt, while making it harder for average taxpayers to receive necessary IRS services.
Experts warn that IRS staffing cuts will aid wealthy tax evaders, costing the government billions and resulting in more audits for working Americans. The cuts, initiated under President Donald Trump’s administration, may worsen IRS customer service.
Despite years of underfunding and understaffing, congressional Democrats and President Joe Biden allocated nearly $80 billion in 2022 to modernize the IRS and target wealthy tax evaders. Now, Trump and Republican allies are reversing these efforts.
What was the state of the IRS before 2022 and how did the Inflation Reduction Act change it?
Congress reduced IRS funding by 25% from 2010 to 2022, with enforcement funding cut by 28%, according to the nonpartisan Tax Policy Center. Staffing fell 30% from 1993 to 2022, over half since 2010.
A Pew Research Center poll showed the IRS was the least favored federal agency. It estimated millions were owed by wealthy non-filers, lacking funds to collect.
The Inflation Reduction Act, signed in 2022, allocated $80 billion over a decade for IRS funding, with half for enforcement. Treasury Secretary Janet Yellen ensured audits targeted large businesses and individuals earning over $400,000, predicting reduced audit rates for others.
The Congressional Budget Office predicted the $79.6 billion investment would be offset by $203.7 billion in collected owed funds.
Republicans criticized the investment. “Taxpayers are not receiving the return on investment promised by the injection of billions of dollars,” they said in a press release. They claimed Democrats allocated funds to hire more agents for auditing working families.
Tax policy experts disagree. The law paid off, says David Kass from Americans for Tax Fairness. “The agency collected over a billion from 1,600 millionaires owing at least $250,000 each,” he said, noting improved customer service reduced call wait times from 30 to 3 minutes.
Joe Hughes from the Institute on Taxation and Economic Policy noted an 85% call resolution rate post-funding, a reversal from prior 15% rates.
What have President Trump and the Republican Congress done since?
Republicans opposed the Inflation Reduction Act, falsely claiming it funded an army of 87,000 agents, and pushed reversals. In March 2024, they forced a $20 billion cut to modernization funds. Another $20 billion cut followed.
The Department of Government Efficiency (DOGE) aims to slash IRS staffing. Plans include firing 6,700 newer employees, voluntary exits of 4,700, and 6,800 more layoffs, totaling 20% of IRS staff according to CNN. A legal challenge is in federal courts.
The White House supported IRS cuts. “Our objective is ensuring productive employees,” said National Economic Council director Kevin Hassett, suggesting more cuts with IT improvements.
“10% of IRS employees are veterans serving their country, ensuring tax compliance,” Kass noted.
What will the impact of staffing cuts be for billionaires?
The CBO predicted on March 11 that IRS funding cuts would reduce enforcement, with $65.8 billion lost by 2034.
The Washington Post reported on March 22 a projected $500 billion revenue loss, a 10% drop in collections. Investigations of significant debts have been dropped.
“Republicans protect billionaire donors,” Kass said. “Wealthy people should pay their legal taxes.”
Hughes criticized the Department of Government Efficiency for failing to collect owed revenue. “Cutting services and employees ensuring payments is the least efficient approach,” he said.
What will be the impact for everyone else?
Kass and Hughes stated that without adequate IRS staff for complex audits, working families face more audits due to simpler tax returns.
Kass warned customer service improvements would reverse: “The average taxpayer won’t get timely refunds or in-person help as the administration plans to close 100 assistance centers.”
With less revenue, the government must cut safety-net programs or increase debt, Kass stated. “The wrong approach is to protect billionaires. The rich should pay their fair share.”
“Gutting the IRS gives tax cheats a pass,” said Tony Carrk from Accountable.US. Trump’s administration makes it difficult to hold corporations accountable for taxes, issue refunds, or provide basic services, he added.
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