A dramatic IRS personnel shake-up is in progress because nearly one-third of the tax auditors exited the agency in only three months. The job cuts are part of the larger abolitionist agenda pushed by Elon Musk’s Department of Government Efficiency (DOGE) in the name of austerity and lean operations.
According to a report dated May 2 by the Treasury Inspector General for Tax Administration (TIGTA), 31% of the IRS auditing staff of around 3,600 employees have either been laid off or accepted the delayed resignation put forth by the DOGE. Altogether, about 11% of the entire IRS workforce will have gone by the time these reforms are fully implemented, starting from earlier this year.
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Focus on high-stakes enforcement
The largest chunk of revenue is from those who fault tax audits, especially on wealthy individuals and large corporations, for leaving. Experts warn that this might really affect the ability of the IRS to ensure task compliance and collect revenue.
“You lose the very staff trained to keep high-end taxpayers and corporate taxpayers in compliance,” noted Emily DiVito, senior adviser at the Groundwork Collaborative and a former Treasury official. She went on to warn that the cuts might encourage non-compliant taxpayers to think that the risk of being audited or penalized is lower than it actually is.
Scrutiny over DOGE’s efficiency drive
Introduced by Musk, DOGE is in some way shortened for ideas of cuts to wasteful expenditures and inefficiencies in government operations. During Tesla’s earnings call in April, Musk said that DOGE is supposed to get the country back on track.
Yet the critics perk up against the cost-saving narrative, wondering whether it is myopic too. Auditors are a revenue source for the federal government. They recommended an increase of $32 billion in tax assessments for the fiscal year 2023. According to Better IRS, a nonprofit, every $1 spent auditing the top 0.1% earners accounts for about $26 in tax revenue.
Biden-era hiring rollback
The cuts are the continuation of the hiring binge under the Biden administration that saw an increase in the IRS workforce from about 79,000 to over 102,000 employees. That hiring was partly paid for with funds from the Inflation Reduction Act and was aimed at ramping up enforcement capability within the IRS.
In a statement, a Treasury spokesperson said that current reductions are focused mostly on junior-rank staff and are intended to roll back “wasteful hiring” while maintaining the delivery of essential services. “The Secretary is committed to ensuring that efficiency is realized while providing the collections, privacy, and customer service the American people deserve.”
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Cost-saving or revenue-losing?
Critics feel the IRS could lose more revenue than the DOGE will save. Yale Budget Lab estimates $323 billion in tax revenue could be lost over the next ten years because of reduced compliance and fewer audits. The Partnership for Public Service, for its part, says that savings amounting to $165 billion due to DOGE have already been offset by related costs of $135 billion, including costs such as re-hiring those employees who were wrongfully terminated and legal challenges.
“The argument from DOGE is to save money,” DiVito said. “But given the potential to lose out on tax revenue, the IRS reduction simply doesn’t make sense.”
