Tax Collector Dismissal Won’t Lower National Debt
TL/DR –
The Internal Revenue Service (IRS) has seen a significant reduction in workforce and a constant reshuffling of leadership, with Melanie Krause being the latest to resign as the head of the agency. The workforce reduction, expected to be as much as 50%, raises concerns about the agency’s ability to effectively collect taxes. This comes amid tensions over the agency’s reduced size following political targeting allegations, the implementation of artificial intelligence, and ongoing debates between Republicans and Democrats regarding the effectiveness of increased funding to the IRS.
IRS Struggles Amid Layoffs and Leadership Changes
The IRS, the nation’s tax collector, faces internal struggles this April. Recently, acting head Melanie Krause resigned following an agreement allowing the Department of Homeland Security to access IRS files of suspected undocumented immigrants, an agreement made without her knowledge.
Krause was the third head of the IRS since Donald Trump’s presidency. Danny Werfel, a Biden appointee, resigned before news of his impending dismissal. He was succeeded by Doug O’Donnell, who subsequently retired after altercations with the Department of Government Efficiency (DOGE). Billy Long, Trump’s nominee for the position, awaits Senate confirmation.
Roughly 5% of the IRS workforce has accepted buyouts amidst the first layoffs, which could see a 50% reduction in the workforce. Some 6,700 employees have been caught in a confusing game of employment ping pong, being dismissed, reinstated, and then placed on paid leave during tax season.
Effect on Debt Collection
The IRS collected $5.1 trillion in fiscal 2024, against a national debt of $36.22 trillion. Despite the debt, attention on national debt collection has been minimal. The Republican Party’s efforts in the past decade to reduce the IRS have resulted in a 19% funding reduction and a 22% workforce reduction, leading to a 71% decrease in millionaire audits.
The Inflation Reduction Act of 2022 aimed at rebuilding and modernizing the IRS by increasing funding by $80 billion over 10 years. Despite debates over the return on this increased spending, there has been a measurable increase in collections from tax-evading millionaires.
Controversy over Direct File Program
Trump administration’s attempts to undermine the Biden legislation pose threats to the new Direct File program, which enables taxpayers to file to the IRS for free. The DOGE declared the program unsuccessful, but the data on this year’s expanded version has yet to be evaluated.
Artificial Intelligence is often touted as the solution to the reduction in IRS employees. As the expectations for AI performance mount, the likelihood of another drop in audits and an increase in system gaming by those with the means is much more probable. The current strategy for reducing national debt seems to be searching for waste and fraud where money isn’t, while promoting wastage where money is.
While Tax Day arrives for most Americans this week, states like Georgia affected by Hurricane Helene have until May 1 to file.
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