Impact of DOGE Cuts: IRS Auditor Workforce Shrinks by Nearly One-Third

The Trump administration's strategic downscaling of the IRS workforce has culminated in about 31% of its tax auditors exiting the agency by March, as indicated by a report from the watchdog of the U.S. Treasury Department.

Elon Musk's initiative, termed the Department of Government Efficiency (DOGE), has concentrated on reducing federal staff numbers via a mix of layoffs and incentivized voluntary resignations. During an earnings call for Tesla on April 22, Musk highlighted DOGE's role in curbing excess and fraud, aiming to set a new direction for the nation.

The IRS has been a prime target for DOGE's budget cuts, aiming to reduce personnel further this year. According to the Treasury Inspector General for Tax Administration (TIGTA), these measures had already decreased the IRS workforce by approximately 11% by March.

Significant Reduction in Auditors

However, it's the auditors, specifically, who have borne the brunt of these cuts, with a striking 31% or roughly 3,600 revenue agents either choosing early retirement or being dismissed in the initial quarter of 2025. Experts warn that such a reduction could hamper the government’s ability to collect taxes efficiently, as these auditors predominantly manage complex cases linked to the affluent and corporations.

Emily DiVito, a senior economic policy adviser at the Groundwork Collaborative, emphasized the loss of skilled staff vital for ensuring compliance among high-net-worth individuals and large businesses. She also pointed out a potential shift in taxpayer behavior, where those averse to paying taxes might increasingly risk non-compliance.

The Biden Administration's spokesperson remarked that the IRS had increased its employment from 79,431 to 102,309 personnel, highlighting that most of the departures under DOGE were voluntary. The emphasis was on rolling back inefficient hiring booms and optimizing critical support functions to enhance efficiency and service quality—a commitment reaffirmed by the Treasury Secretary.

Though the exact reasons behind the sharper decline in auditor numbers weren't outlined in the TIGTA report, attempts under the Biden administration aimed to bolster the auditor ranks to improve revenue collection. The IRS had projected increased tax recovery, leveraging funds from the Inflation Reduction Act for more hires.

Challenges in Revenue Collection

Targeting audits at wealthy individuals and major corporations typically yields considerable returns for the federal coffers. In 2023, auditors suggested additional taxes amounting to $32 billion. The group Better IRS advocates for the tax agency, noting that audits of the top 0.1% income earners can return about $26 in revenue for every dollar spent.

The reduction in the IRS's auditing capability raises questions about the efficacy of DOGE's strategy, given the agency's pivotal role in national revenue collection. Federal revenue largely hinges on individual and corporate income taxes, contributing 60 cents per dollar collected, supplemented by payroll taxes and other fees.

According to the Partnership for Public Service, a nonpartisan research outfit, DOGE's trimming of IRS staff might incur costs nearly equivalent to the savings, factoring in costs like paid leave, incorrect dismissals, and diminished productivity. These figures exclude ongoing legal battles surrounding DOGE’s decisions and the potential decrease in tax revenue resulting from IRS cutbacks.

A projection by the Yale Budget Lab suggests that the IRS might forego $323 billion in revenue over the next decade due to reduced auditing and lower compliance rates. DiVito argues that reductions justified as cost-saving measures may paradoxically undermine the financial integrity intended by these cuts.

Aimee Picchi, representing CBS MoneyWatch as an associate managing editor, has a background with Bloomberg News and contributes extensively on economic topics for major national publications.