BEYOND THE NUMBERS
On Tax Day, Reject DOGE-Led Cuts to the IRS Workforce and Budget
The “Department of Government Efficiency” (DOGE) and the second Trump Administration have led a myriad of attacks on the IRS, targeting staff, enforcement funding, customer service for filers, and data privacy. These attacks on the IRS are costly and are the exact opposite of DOGE’s stated goals of reducing fraud and abuse. On Tax Day, Congress should use its power to resist the Administration’s efforts to decimate the IRS, so that honest taxpayers can file with ease and tax cheats pay the taxes they legally owe.
Before the IRS funding improvements under the Inflation Reduction Act (IRA), congressional Republicans drove deep IRS budget cuts of roughly 20 percent (after accounting for inflation) from 2011 to 2020, leading to deep staffing cuts and causing dysfunction across the agency. As many as 9 in 10 taxpayer phone calls went unanswered in 2021, while audit rates plummeted for millionaires and the largest corporations (see first chart), contributing to the $625 billion annual net tax gap. This is just a preview of the harms that the Administration’s even larger staffing cuts will cause.
Last year, we highlighted some of the IRS’s successes in improving tax filers’ experience and enforcement systems utilizing IRA funding. The agency vastly improved phone service, served more tax filers in person by opening or reopening Taxpayer Assistance Centers, and improved communication with filers via website upgrades, including the IRS Online Account, which lets filers, including small businesses, communicate with the IRS and receive up-to-date information about their returns.
The IRS also oversaw a successful pilot program of Direct File, which enabled over 140,000 taxpayers to file their federal tax returns online directly with the IRS at no cost. This year, the program has expanded from 12 states to 25, with an estimated 30 million taxpayers eligible.
However, these and other innovations are at risk due to staffing cuts and funding rescissions. Congress rescinded $41.8 billion — over half — of the IRA’s funding for the IRS via the 2024 and 2025 appropriations processes, and the rest remains under threat of cuts or rescissions in the current budget reconciliation process. And the Administration has already fired over 7,000 IRS employees and is planning to cut 11,000 more by May 15, reportedly with the end goal of cutting the agency workforce by up to half.
As we’ve seen in the past, staff and budget cuts hurt tax filers by making it harder for them to get their tax questions answered, file their returns, or receive timely refunds. It also hinders the agency’s ability to administer the tax code and collect legally owed taxes — particularly from high-income and high-wealth taxpayers. Research shows that every dollar spent on IRS tax enforcement raises multiple dollars in revenue, which means that every dollar cut from IRS enforcement loses more than a dollar of revenue.
The Yale Budget Lab estimated that the planned reduction in force could lose almost $160 billion in net revenue from reduced collections from audited taxpayers. But staff cuts on the scale the Administration is considering could also cause substantial reductions in voluntary tax compliance. With an 18 percent staff cut, revenues could fall by $1.6 trillion over the next decade; if cuts reach 50 percent, revenues could fall by $2.4 trillion (see second chart).
DOGE’s actions also pose major risks to taxpayers’ privacy, which is protected under law, and have included seeking access to detailed information on Treasury Department payment systems and tax returns. The IRS has reportedly finalized a data-sharing agreement with Immigration and Customs Enforcement (ICE) to allow sharing of taxpayer information that may aid in its deportation efforts.
This is of particular concern for taxpayers who lack a Social Security number and instead file their taxes with an Individual Taxpayer Identification Number (ITIN), including many immigrants without a documented status. Federal law requires all U.S. residents with taxable income to file tax returns regardless of immigration status, and for decades the IRS has assured filers of its statutory requirements to protect personal information, other than under narrow circumstances specified by law.
People without a documented immigration status are deeply ingrained into U.S. communities and contributed an estimated $66 billion in federal tax revenue in 2023. IRS efforts to exchange data with ICE could undermine trust in the IRS’s commitment to keep information confidential, resulting in a chilling effect on voluntary tax compliance. Steps that could reduce tax compliance, and thus revenues, undermine DOGE’s stated goals and threaten the stability of our revenue system.
