Elon Musk's cut-first, the federal run of the targets is based on the idea that the country's finances are in crisis and that spending should be significantly reduced to recover. But what the team at least one cut mask is planning is actually costing government money and exacerbating the fiscal crisis the Trump administration claims is a national emergency.
It's a mask plan to cut jobs at the U.S. Internal Revenue Service.
At the request of Musk's Government Efficiency Department team, the IRS is planning to fire up to 6,700 employees, with ull reportedly beginning last Thursday. Those affected include more than 5,000 workers handling audits and collections despite assurances from IRS managers whose positions are not affected by the important ones for tax return season. Many of them are probation employees who have worked for the federal government for less than a year and are not entitled to quit.
So how do these cuts cost more?
If more people are enforcing taxes, you can see that the money spent on IRS agents is being paid in itself multiple times to increase the income the government is owed legally under tax law.
The Biden administration has shown that investments in the U.S. Internal Revenue Service could benefit tax revenue, allowing new agents to be hired and enforcement can be focused on the highest incomes.
The layoffs may just be the beginning. Trump is proposing the creation of a “external revenue service” funded by tariffs, with the intention of replacing the IRS. That sounds exaggerated, and Trump brings out many extreme ideas that will never come to fruition. However, even more substantial cuts in the IRS workforce could lead to a corresponding decline in tax collection, especially among the wealthiest Americans who have recently been subject to tax enforcement.
The IRS got more resources and continued to receive higher tax revenues
In mid-2022, President Joe Biden signed the Inflation Reduction Act. This included a $80 billion investment in 10 years of tax enforcement activities in the IRS, including hiring IRS agents. Over the next two years, the agency's workforce grew with over 15,000 full-time employees.
A massive surge in total revenue continued, jumping from $4.7 trillion in 2023 to about $5.1 trillion the following year, according to data from the IRS and national taxpayer advocates.
Clearly, most importantly, there are many factors that contribute to tax revenue levels, such as the state and size of the economy in a given year. However, in the leap of 2023-2024,
A report from the government's Accountability Office found that much of the increase was from enforcement efforts against people who make more than $400,000 a year. That suggests that step-up IRS enforcement played a prominent role.
The agency collected about $1.1 billion from 1,600 of the wealthiest Americans with outstanding tax liabilities in 2024, up from $38 million the previous year. As the IRS had the staffing level needed to ultimately investigate, the money was collected and helped to make some progress in filling the estimated $696 billion gap in outstanding U.S. taxes.
Despite its significant boost to IRS funding, tax collection costs have actually declined in recent years. For every $100 collected, the IRS spent only 34 cents in 2023.
That wasn't enough proof to save the jobs of the thousands of IRS workers currently facing layoffs. Cutting the IRS workforce during a period of increased income and efficiency could ultimately backfire, exacerbating the allegations of a financial crisis that Mask claims they want to resolve.
