A Penny wise and a Pound foolish … IRS Cuts

The saying goes “a penny wise and a pound foolish.” Maybe immigrant Elon Musk isn’t familiar with this good old American saying, but he should be.

DOGE’s cuts to the IRS threaten to cost more than DOGE will ever save. The Trump administration believes that slashing federal agencies will save money, but reducing the IRS means the government will collect fewer taxes.

Unlike other federal agencies, cutting the IRS results in less money collected and fewer tax abuses uncovered. Economic studies have shown that for every dollar spent by the IRS, the agency returns between $5 and $12, depending on the taxpayer’s declared income. A 2024 report by the nonpartisan Government Accountability Office revealed that the IRS saved $13,000 for every additional hour spent auditing the tax returns of wealthy taxpayers – a return on investment that would make Wall Street hedge fund managers jealous, according to the Institute on Taxation and Economic Policy.

The Trump administration’s strategy to shrink the government has been haphazard and widespread, aiming to remove civil servants quickly from as many agencies as possible while demoralizing those who remain. ProPublica discovered that the recent IRS layoffs included highly skilled probationary workers who had recently joined the government or moved from another agency.

In late February, the Trump administration began firing over 6,000 IRS employees. The agency has been hit hard because it spent 2023 preparing to hire thousands of new enforcement and customer service personnel, only beginning to hire and train them on a large scale in 2024. “Large businesses and wealthy individuals, “like Trumps friends”, are where you find the most sophisticated taxpayers, tax preparers, and lawyers who push the boundaries as much as possible. Well we could guess he wants to protect them not the middle class.