As tax season wraps up, the Internal Revenue Service (IRS) is undergoing a dramatic downsizing—and experts are sounding the alarm. Under plans spearheaded by Elon Musk’s Department of Government Efficiency (DOGE), the IRS is cutting its workforce by 18% by late May. A panel of leading tax experts warns that the consequences could be catastrophic for government revenue, taxpayers, and the broader economy.
As tax season wraps up, the Internal Revenue Service (IRS) is undergoing a dramatic downsizing—and experts are sounding the alarm. Under plans spearheaded by Elon Musk’s Department of Government Efficiency (DOGE), the IRS is cutting its workforce by 18% by late May. A panel of leading tax experts warns that the consequences could be catastrophic for government revenue, taxpayers, and the broader economy.
At a national media briefing hosted by American Community Media on April 11, four tax experts – Natasha Sarin (Yale University), Michael Kaercher (NYU Tax Law Center), Richard Prisinzano (Budget Lab), and Aravind Boddupalli (Urban-Brookings Tax Policy Center) – outlined the risks in stark terms.
Natasha Sarin, Professor of Law and Finance at Yale University, explained the critical role the IRS plays.
“The IRS is going to collect about 97% of the revenues that fund the federal government,” Sarin said. Yet, she warned, staffing cuts could cause the IRS to “miss out on about $700 billion in taxes that are owed and won’t be collected.”
Budget Lab projections show that the impact could be even larger.
“We think the number could be like $400 billion, but it could also be as high as $2.4 trillion of losses over this decade,” Sarin added.
She called the planned 50% workforce reduction “cataclysmic,” likening it to rolling the IRS back to staffing levels not seen since 1960.
Beyond enforcement, Sarin warned that recent data-sharing agreements between the IRS and Immigration and Customs Enforcement (ICE) have fractured trust in the system, particularly among immigrant taxpayers.
“We suggest that we think there’s a range, but a good way to think about the possible consequence is losing about $26 billion in tax revenue this year alone,” she said.
Michael Kaercher, Deputy Director of the NYU Tax Law Center, provided context on how proposed extensions of the 2017 Trump-era tax cuts factor into the equation.
“They’ve set themselves up to basically do another tax cut—this time about $5 trillion,” Kaercher said, noting that the benefits are heavily skewed. “About half are expected to go to the top 5% of earners.”
Kaercher criticized Congress’s accounting tactics, which he described as “pure marketing” and “unprecedented,” allowing $3 trillion of the tax cuts to effectively disappear from official cost projections. He also flagged the troubling trade-off: “You’re paying for these incredibly generous tax cuts for the rich, if at all, by cutting Medicaid and SNAP—programs critical to low-income Americans.”
Kaercher stressed that while cuts are being made in the name of fiscal responsibility, the reality tells a different story: “Reduced tax compliance, especially from large businesses and wealthy individuals, is likely.”
Aravind Boddupalli, Senior Research Associate at the Urban-Brookings Tax Policy Center, warned that new IRS-ICE data sharing agreements could push many immigrants out of the formal economy.
“This agreement will effectively reduce how much federal taxes the agency collects because immigrants who are currently filing taxes may be intimidated or worse, deported,” Boddupalli said. He noted that undocumented immigrants contribute over $60 billion in federal taxes annually, despite being excluded from many government benefits.
“The repercussions of this agreement are pushing immigrants further into the shadows,” he said. “And we’re all collectively worse off for it.”
Boddupalli, a naturalized citizen, shared his personal experience navigating fears during past immigration crackdowns, emphasizing that such policies have chilling effects not just on undocumented immigrants but on entire communities.
Some policymakers have floated artificial intelligence (AI) as a solution to replace IRS staff. However, Richard Prisinzano, Director of Policy Analysis at the Budget Lab, said that’s unrealistic.
“The IRS’s computer systems are really quite antiquated,” Prisinzano said, explaining that much of the agency’s data infrastructure is decades old. “Even if they were to implement AI, you’d need the funding to update the computer systems first.”
Prisinzano warned that without significant modernization, the use of AI would be limited—and mass layoffs would severely undercut the IRS’s ability to enforce tax compliance or assist taxpayers.
The experts agreed: shrinking the IRS, extending tax cuts for the wealthy, and undermining taxpayer trust could produce long-lasting damage.
Kaercher summarized the stakes bluntly: “An enormous tax cut going primarily to the rich, paid for, if at all, on the backs of low- and middle-income Americans.”
As Congress moves toward major tax policy decisions later this year, the experts urged policymakers—and the public—to consider the bigger picture.
