IRS will lose millions as Trump and Musk scurry to cut taxes for rich pals
A new report released on Monday projects that the IRS is set to lose over $500 billion in tax revenue over the next tax season as a result of actions taken by President Donald Trump and his top donor Elon Musk’s Department of Government Efficiency group.
The Washington Post reports that taxpayer behavior has been affected following Trump’s action to fire nearly 20,000 employees of the agency and that internal systems are being affected. The IRS has had to drop investigations of tax evasion by wealthy taxpayers and large corporations, which increased under the Biden administration, and task more staffers to instead fill in the gaps left by the Trump-Musk changes.
Data is already beginning to confirm the dire projections. For the current tax season, the IRS has already received 1.7% fewer returns than it took in at this same point in 2024.
Sources within the agency also told the Post that the IRS has seen an increase in online chatter from people who have said they will file to claim tax credits that they are ineligible for (because there are fewer auditors to verify the information), and from others who said they just won’t pay their obligations.
The administration was warned this could happen. Senior IRS officials gave a briefing to the Trump transition team explaining that revenues would go down with cuts.
“Aggressive reductions to budget and personnel capacity risk backlogs, delays, reduced receipts, and diminished capacity to build next generation digital capabilities,” the presentation noted.
Additionally, the haphazard method the administration has used to purge federal employees is increasing costs in many cases, the opposite of the purported savings that Musk and Trump have repeatedly touted (usually with fraudulent data).
IRS employees that have been cut have sometimes been involved in projects and initiatives intended to either recoup unpaid taxes or improve agency processes, meaning that incomplete projects end up costing more than the short-term money the government no longer has to pay out in salaries.
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The lost revenue—which pays for essential government services across the country—is a reversal from recent improvements instituted by the Biden administration.
As part of the Inflation Reduction Act (which was unanimously opposed by Republicans in the House and Senate), the IRS got a boost in agents who were then tasked with recouping income that had not been paid by the super-wealthy. At the end of 2024, the IRS announced that an additional $1.6 billion had been brought in from these people in the previous year.
The Biden law also set in motion a modernization program at the IRS meant to better service taxpayers.
Under Trump, the agency has now regressed—a revenue shortfall is coming. At the same time, Republicans are pursuing tax cuts for the wealthy who just got a green light to evade more taxation.
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