The IRS is cutting nearly 7,000 employees, which will reduce its ability to catch tax cheats and answer taxpayer questions. Barron’s explains:
Recent improvements in taxpayer services are expected to be unwound by the firing of nearly 7,000 Internal Revenue Service employees, which began on Thursday at the height of the tax-filing season….Slashing the IRS’s workforce means that the troubles that exasperated taxpayers for years in their dealings with the agency are likely to return, tax experts say.
“We will see longer wait times on the phone, and it could lead to delayed refunds and issues with resolving matters,” says Clay Hodges, director of national tax at Moss Adams, as layoffs began Thursday. “The IRS has been trying to get more modernized and more efficient, but this changes today.”
The layoffs of nearly 7% of the IRS’s 100,000 employees were directed by the Department of Government Efficiency (DOGE) run by President Donald Trump’s advisor Elon Musk.
Workers getting let go are those who have been with the agency for less than two years, which means they are classified as probationary workers.
These are the folks the IRS has been hiring recently to improve its capabilities after years of dismal service and near-zero audit rates for the most complex tax returns.
Even Republican tax experts said that the layoffs are a bad idea that will result in more people cheating on their taxes and the budget deficit increasing. The man President Trump picked to head the IRS in 2018, who served as the IRS commissioner until 2022, said the layoffs were a bad idea:
Former IRS Commissioner Chuck Rettig — who ran the agency during President Donald Trump’s first term — criticized the planned layoffs.
“An underfunded IRS significantly benefits unidentified, noncompliant taxpayers at the direct expense of compliant taxpayers,” he said, writing on LinkedIn.
Similarly, an economist at the conservative Manhattan Institute notes that “Laying off thousands of IRS agents will worsen budget deficits.”
Politico says the “reductions are expected to disproportionately hit those working in enforcement, partly because they represent a large share of those recently brought on board, which could hurt tax collections.” “Getting rid of newer employees could hit the agency especially hard because it has long been plagued by high attrition rates and has a disproportionately older workforce. Nearly two-thirds of IRS employees are eligible to retire in the next six years.”
Firing 7,000 IRS staffers will reduce tax collections by at least $3 billion annually, and perhaps as much as $10 billion annually.
The Department of Government Efficiency (DOGE) claims that its cuts so far (in the entire government, not the IRS in particular) will save taxpayers $55 billion. But Yahoo News suggests that those cuts will save only $7.2 billion. If there have only been $7.2 billion in true savings, that could be entirely offset by the billions of dollars in tax revenue lost from laying off IRS staff who collect taxes.
So DOGE may not end up reducing the budget deficit much at all, unless it manages to make significant cuts in the Defense Department, the agency with by far the biggest number of government employees. The Pentagon is expected to lay off at least 5,400 civilian employees in the near future, but that is a smaller percentage of its workforce than has been laid off at many other agencies.
Congress is moving to increase the Defense Department’s overall budget. Moreover, the Pentagon is pushing back against some of DOGE’s demands, and is unlikely to acquiesce in many of the cuts that DOGE may recommend.
