The Trump administration’s initiative to scale back the workforce of the Internal Revenue Service (IRS) has led to a striking reduction in its staff, particularly among those tasked with auditing tax returns. This development is part of a broader policy push under the banner of the Department of Government Efficiency (DOGE), led by Elon Musk. DOGE’s mandate has ostensibly been to eliminate waste and fraud across the federal government, a mission Musk articulated during Tesla’s earnings call on April 22, where he asserted these measures would help get the country “back on track.”
According to a detailed May 2 report by the Treasury Inspector General for Tax Administration (TIGTA), the IRS has seen an alarming exodus of personnel. Since January, about 11% of its staff have left, but the departure rate amongst revenue agents—those IRS employees responsible for conducting audits—has been even more pronounced. Approximately 31% or about 3,600 auditors have exited the agency, either through layoffs or the unique “deferred resignation” plan introduced by Musk’s DOGE.
This significant decline in auditors poses serious implications for tax revenue collection, particularly as these personnel typically handle complex cases involving wealthy individuals and large corporations. The presence of fewer auditors could potentially lead to decreased compliance with tax laws. Emily DiVito, a senior adviser on economic policy at the Groundwork Collaborative and a former policy adviser at the U.S. Treasury Department, stressed the dire consequences of such staff reductions. “You lose the very staff trained to keep high-end taxpayers and corporate taxpayers in compliance,” she noted.
DiVito also pointed out potential behavioral shifts among taxpayers, particularly those inclined to evade paying taxes, who might feel emboldened by the reduced risk of audits and penalties. The cuts were part of a broader strategy under the Trump administration, which saw the IRS workforce initially swell under the Biden administration from 79,431 to 102,309 personnel, only to shrink back under the auspices of efficiency and budgetary prudence.
A Treasury spokeswoman underscored that most of the departures were voluntary, facilitated through the Deferred Resignation Program. She stated that this rollback was necessary to eliminate what she termed “wasteful Biden-era hiring surges” and consolidate critical functions to enhance the agency’s efficiency and service quality.
The Treasury report did not delve into why auditors, in particular, were leaving in greater numbers than other IRS staff, but it hinted at the possibility that many recently hired under initiatives aimed at boosting compliance and revenue might have been among the first to be let go under the current administration. The timing coincides with heightened IRS efforts under the Biden administration, buoyed by funds from the Inflation Reduction Act, which projected generating substantial additional revenue by enhancing audit capabilities.
Auditing the wealthiest Americans and large corporations is not only a matter of legal compliance but also a significant revenue source. For instance, in fiscal year 2023, auditors succeeded in recommending an additional $32 billion in tax assessments. Studies, such as one from the advocacy group Better IRS, suggest that every dollar spent on auditing the top 0.1% of earners returns about $26 in revenue. However, with the cuts to auditing personnel, there are growing concerns regarding the ultimate cost-effectiveness of DOGE’s strategy.
While the immediate savings from the federal workforce reduction under DOGE are reported to be around $165 billion, there are substantial costs associated with these moves—estimated by the nonpartisan Partnership for Public Service to be about $135 billion. These figures consider expenses related to paid leave, the rehiring of wrongfully terminated workers, and lost productivity. Importantly, the calculations exclude litigation costs arising from challenges to DOGE’s actions and the prospective losses in tax revenue due to reduced audits and compliance.
Furthermore, projections from the Yale Budget Lab estimate that the IRS could miss out on about $323 billion in tax revenue over the next ten years due to diminished tax compliance and a drop in audit rates. This emanates from a broader concern echoed by analysts like DiVito, who argue that while the intent of reducing federal workforce size is to economize, the approach may be counterproductive if it significantly undercuts the government’s ability to collect revenues efficiently.
As discussions continue, the administration’s stance and the outcomes of its workforce management strategies remain closely observed by policymakers and analysts alike, bearing implications for the broader U.S. fiscal landscape and the operational efficacy of its critical agencies like the IRS. The ultimate measure of success for DOGE’s initiatives will likely hinge on a complex balance between achieving administrative efficiencies and maintaining robust revenue streams essential to funding federal programs and services.
