The IRS reports increased efficiency and higher tax receipts following significant budget cuts and workforce reductions under the Trump administration.
At a Glance
- IRS reports 5% rise in tax receipts despite budget cut
- $4 billion spent on unfinished API project over 20 years
- 30,000 IRS jobs cut through buyouts and layoffs
- Biden seeks $104 billion IRS boost through 2034
IRS Reports Efficiency Gains Amid Budget Cuts
The Internal Revenue Service has reported a 5.3% year-over-year increase in tax receipts, despite the agency facing a $2.5 billion budget cut over the past year. Alongside this increase, the IRS processed 1.5% more tax returns than the previous season, a boost attributed to recent reforms in staffing and operations, according to reporting by Fox Business.
Acting IRS Commissioner Michael Faulkender credited these gains to a restructured and more agile agency, stating, “We are making Treasury efficient again… The data backs the great work that we’re doing to make sure that the IRS works for the American people, not against them,” as quoted by Fox Business.
Watch Fox Business’s report on the incident at IRS says tax collection is more efficient this year, and receipts are up more than 5%.
$4 Billion Tech Project Still Incomplete
While operational performance has improved, the agency’s tech modernization continues to be a sore spot. The IRS has spent over two decades and approximately $4 billion attempting to implement a unified API system—yet the project remains unfinished. Critics argue this represents systemic inefficiency and a lack of private-sector rigor in federal tech execution, as reported by Fox Business.
In response to these failures, the IRS has begun replacing non-technical staff with qualified engineers, aiming to rebuild its IT infrastructure with a more capable and experienced workforce, Fox Business noted.
Workforce Downsized Through Buyouts and Layoffs
As part of broader restructuring, the IRS has eliminated approximately 30,000 positions through a mix of voluntary buyouts and layoffs. Over 22,000 employees accepted buyouts, while 7,000 more probationary workers were laid off earlier this year. These actions form part of a larger plan to reduce IRS staffing by 40%, a strategy first outlined by the Department of Government Efficiency, according to Federal News Network.
The Department, created under the Trump administration and currently overseen by Elon Musk, has faced pushback from labor unions, which are now suing to halt what they call “reckless dismantling” of essential services, as reported by The Washington Post.
Biden Proposes Massive IRS Expansion
Meanwhile, the Biden administration is seeking to dramatically expand the IRS. Its Fiscal Year 2025 budget proposal includes a request to extend Inflation Reduction Act funding, pumping an additional $104 billion into the agency through 2034. The administration claims the expanded funding will result in $341 billion in new federal revenue by improving enforcement and closing tax loopholes, according to the IRS’s Strategic Operating Plan Update.
The IRS says the funds will support modernized technology, improved taxpayer services, and compliance efforts targeting high-income earners and large corporations, per IRS.gov.
Critics Warn of Revenue Loss and Overreach
While Trump officials point to better results with leaner resources, critics argue that long-term underfunding will hamper the agency’s capacity to manage complex tax filings and enforce compliance. A separate report from The Washington Post warned that reduced IRS staffing could lead to significant losses in uncollected revenue.
The debate over IRS reform now centers on two opposing philosophies: downsize and streamline vs. expand and modernize. With Faulkender pledging to advance President Trump’s tax reform agenda, and Biden betting big on IRS investment, the agency finds itself at the center of an ideological standoff.
