IRS Job Cuts Could Cost U.S. $159 Billion in Lost Taxes

Key Points

• • The Trump administration plans to cut approximately 18,200 IRS jobs, aiming for cost savings but risking significant revenue losses.
• • Yale University's Budget Lab reports that these cuts could lead to an $8.3 billion decrease in tax revenue next year, resulting in a net loss of $6.8 billion.
• • If IRS staffing remains reduced over the next decade, uncollected taxes could accumulate to $159 billion due to decreased compliance efforts.
• • Economists argue that reducing IRS staff undermines revenue collection, particularly from wealthy taxpayers who account for a substantial portion of unpaid taxes.
• • The IRS's ability to audit and enforce tax compliance is expected to diminish, potentially encouraging tax evasion among high earners.
• • The Biden administration previously allocated $80 billion to the IRS to enhance tax collection, particularly from the wealthy, which Republicans criticized.
• • Meanwhile, tax return filings have dropped by nearly 1 million compared to last year, with an increase in extension requests as the April 15 deadline approaches.
• • Some taxpayers may be delaying filings due to internal IRS chaos or the fear of deportation related to data sharing with immigration authorities.
• • Despite staffing cuts, the IRS has reportedly maintained steady customer service wait times, improving from previous years.
• • The IRS anticipates a potential 10% decrease in collected taxes by the April deadline, equating to over $500 billion in lost revenue, though some data indicate current revenue is up compared to last year.
• • The IRS Direct File program, allowing eligible taxpayers to file for free, has expanded but faces uncertainty regarding its future amid political and administrative changes.
• • Analysts caution that various factors, including economic policies and taxpayer behavior, will impact the overall revenue collection this tax season.