Overview of Workforce Changes

Recent reports from the U.S. Treasury Department’s watchdog indicate a significant reduction in the IRS workforce, particularly affecting tax auditors. Nearly one-third of the agency’s auditors have left as part of the workforce trimming efforts initiated during the Trump administration.

Department of Government Efficiency Initiatives

Elon Musk’s Department of Government Efficiency (DOGE) is at the forefront of these reductions, employing methods such as layoffs and a deferred resignation program to maximize efficiency in the federal workforce. During a recent earnings call, Musk highlighted that the agency’s focus on reducing waste and fraud aims to “get the country back on track.”

Impact on IRS Operations

According to a report released on May 2, 2025, approximately 11% of the IRS workforce has been cut, with auditors facing a more drastic decline of 31%. This equates to around 3,600 tax auditors departing, either through the deferred resignation program or termination. This loss of trained auditors could significantly impair the federal government’s capacity to collect tax revenue, particularly from high-income individuals and corporate enterprises.

“You lose the very staff trained to keep high-end taxpayers and corporate tax payers in compliance,” said Emily DiVito, senior adviser on economic policy at the Groundwork Collaborative.

Administration’s Response

A Treasury Department spokesperson indicated that while the Biden administration expanded the IRS workforce, a considerable number of employees have chosen to leave voluntarily as part of DOGE’s cost-cutting strategies. The spokesperson asserted that consolidating efforts would enhance efficiency and service quality for taxpayers.

Challenges in Tax Compliance

The reductions in auditor numbers raise concerns about the government’s ability to maintain effective tax compliance. The IRS previously anticipated increased revenue collection through new hires funded by the Inflation Reduction Act in early 2024, expecting hundreds of billions in additional tax collections. However, the recent cuts might reverse these expectations.

Financial Ramifications

Auditing high-income earners can yield substantial returns for the federal government. The TIGTA report highlighted that auditors recommended additional tax assessments totaling $32 billion in fiscal year 2023. Notably, a report from Better IRS indicated that for every $1 spent on auditing the wealthiest 0.1% of earners, the government could stand to gain approximately $26 in tax revenue.

However, the cuts to the auditing staff may have substantial financial consequences, which are echoed in an analysis by the Partnership for Public Service. While DOGE claims to have saved $165 billion, this figure could be offset by losses from paid leave, wrongful firings, and decreased productivity that could total around $135 billion, not accounting for temporary lawsuits against DOGE.

Projected Revenue Losses

Estimates from the Yale Budget Lab suggest that the IRS could face an alarming potential loss of $323 billion in tax revenue over the next decade due to decreased audits and compliance. Emily DiVito underscored the shortsightedness of DOGE’s funding cuts, arguing that the strategy could result in a net loss rather than savings for the U.S. government.