Even conservatives are worried about Trump's plans to slash the IRS

Endless telephone holds. Slower refunds. Bigger budget deficits.

That’s just some of what could be in store for Americans if the Trump administration goes forward with the plans it is reportedly considering to cut the Internal Revenue Service’s workforce in half, according to tax experts.

The move would not just undo recent efforts to restaff and modernize the IRS but threatens to fundamentally cripple an agency responsible for processing around 270 million tax returns from individuals and businesses each year, both Democratic and Republican former officials told Yahoo Finance.

“Even with recent technological enhancements, every internal and external IRS function will be at risk,” Charles Rettig, who served as Donald Trump’s handpicked IRS commissioner during his first term, told Yahoo Finance in an email. “The agency will likely struggle to meet basic levels of service and compliance.”

The IRS has already laid off about 7,000 probationary employees as part of Trump’s broader effort to slash the federal bureaucracy, raising concerns that they could impair service during this year’s filing season. But as the New York Times and Associated Press revealed this week, the agency’s leaders are now considering a further 50% cut to its roughly 90,000-strong workforce. The IRS did not respond to requests for comment.

Such a reduction would leave the IRS with less manpower than at any time since the 1950s.

David Kamin, an NYU tax law professor who served as economic adviser to former President Joe Biden, said it was hard to picture how the agency would even operate with that level of resources.

“We have not had an IRS that is like that in modern times, with the economy we have today and the tax code we have today,” he said. “But it can’t function in any way like we’ve seen it function.”

Read more: Free tax filing: How to file your 2024 return for free

During the Biden administration, Democrats sought to rebuild the IRS after a decade in which budget cuts had knocked its staffing down to 1970s levels and audit rates on individual returns fell by more than half. The party included $80 billion in the Inflation Reduction Act to help modernize the agency’s customer service and processing systems and beef up enforcement, with the aim of collecting more of the roughly $600 billion Americans fail to pay in taxes each year.

That money helped the IRS fix many of the service problems that cropped up during the pandemic when its phone lines were overwhelmed, and many returns were delayed. Among other steps, the agency hired more customer support representatives, which — at least by its main measure — reduced the wait times on phone calls during filing season from 28 minutes to 3 minutes, and launched an effort to reduce its notorious backlogs by digitizing more paper returns. It also began hiring tens of thousands of more staff, with the goal of significantly increasing audits on the wealthy and large corporations by the tax year 2026.

Downsizing the workforce by half would set that work back and then some, said Danny Werfel, who served as IRS commissioner under Biden.

“Taxpayers should expect performance levels similar or worse than what occurred during the COVID-19 pandemic — 1 in 10 calls answered, 30-minute wait times or more, towering stacks of paper returns delayed in the processing pipeline, and therefore months-long delays in processing owed refunds to taxpayers,” Werfel said in an email.

Most experts believe that slashing the ranks of IRS agents would likely end up costing the government more than it would save by kneecapping its ability to catch tax dodgers. The government brought in $98.7 billion through enforcement actions last year, and the IRS has estimated that each additional dollar it spends on audits brings in $6 of extra revenue. Economists have found that audits of higher-income taxpayers have a return closer to $12-to-$1.

“It is hard to estimate how significant of a loss the agency will suffer if the IRS is staffed at low levels not seen since the post-World War II-era,” said Natasha Sarin, a former tax policy adviser at the Biden Treasury Department. “But very conservatively, we are talking about hundreds of billions of dollars in increased evasion.”

One possible problem: If people are less likely to get caught cheating on their taxes, they also may become less likely to pay them voluntarily, threatening a downward spiral in compliance. Americans today are fairly good about paying what they owe to the government compared to Europeans, who’ve made tax evasion a way of life in countries like Italy. But that could change.

Even before Trump’s layoffs began, Republicans were widely expected to reduce the IRS’s headcount. GOP lawmakers fiercely opposed the Biden administration’s infusion of cash into the agency and managed to claw back $20 billion of it during budget negotiations. Thanks to a drafting error in last year’s continuing resolution that kept the government operating, the agency could lose another $20 billion this year.

But some conservative tax policy experts told Yahoo Finance that it would be misguided to significantly cut IRS staff without first simplifying the tax code, which would reduce the need for a massive customer service operation and complicated enforcement efforts.

“If the Republicans simplify the tax code dramatically like they contemplated during the 90s with a flat tax, then you could cut the IRS in half,” said Christopher Edwards, a fiscal policy expert at the libertarian Cato Institute. “But we have a president who wants to make the tax code more complicated.”

As an example, he pointed to Trump’s proposal to eliminate taxes on tips.

“That will require a lot of administration and additional auditing since you’re creating a lot of incentives for regular workers to shift their wages into tips,” Edwards said.

Mark Everson, who served as IRS commissioner under George W. Bush, said he supported efforts to streamline the IRS. But he argued the agency should wait until it finishes modernizing its IT and customer support systems before deciding how many workers it can afford to cut.

“I’m an advocate of efficiency and accountability, including at the IRS,” he said. “It would be best if they could find some way when they’re doing cuts that they’re looking at the right positions and retaining the right people. This very blunt instrument they’re wielding doesn’t allow them to do that.”

Cutting the IRS to the bone could change its enforcement priorities too. The agency would likely spend less of its reduced resources examining the taxes of wealthy households and businesses, which requires significant manpower, and more time auditing wage-earners, which is simpler since employers report most of their income on W2s.

During the first Trump administration, the IRS put much of its emphasis on auditing taxpayers who applied for the earned income tax credit, which boosts incomes for low-income and working-class families.

“The areas where you would potentially continue to see enforcement are places where it’s easiest to connect the dots,” said NYU’s Kamin.

Jordan Weissmann is a senior reporter at Yahoo Finance.

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