Some Republicans question Trump’s IRS budget cuts

Even as Treasury Secretary Scott Bessent touted technology-related savings and the use of artificial intelligence to improve tax collections, some Republicans seemed skeptical of the administration’s proposed $2.5 billion cut to the IRS budget during a Tuesday hearing.

The reduction would be the latest in a string of decreases to the tax agency’s budget. It got $80 billion from the Inflation Reduction Act for enforcement, technology improvements and taxpayer services in 2022, but Republicans have since pushed to claw back much of that money. 

“Congress has been pulling back money from the IRS over the last several years, somewhere in the range of about $41.7 billion,” said Rep. Dave Joyce, R-Ohio, who chairs the subcommittee with jurisdiction over the Treasury and the IRS. 

“Some may ask, ’What's left to cut from the IRS?’” he continued, asking Bessent to talk about “why streamlining operations will benefit taxpayers and not hurt them.”

“The IRS is 30 years behind, 30 years behind on an IT modern modernization project where perhaps up to $50 billion of taxpayer money has been wasted. We are rightsizing that. So the substantial decrease in the IRS budget [is] largely in IT. We have had a large number of employees take the option for early retirement or for retirement,” Bessent replied. “We are just taking the IRS back to where it was before the IRA bill substantially loaded the personnel and the infrastructure.”

During the Biden administration, the IRS used the 2022 funding bill to staff up to over 100,000 employees following years of staffing cuts. The Trump administration, meanwhile, has sought to shed employees across the government, including from the IRS. 

So far, the agency’s workforce has shrunk by 11%. But the IRS is reportedly planning to cut up to 40% of its employees, which would put its workforce size as much as 20,000 employees below the 80,000-strong workforce it had at the end of fiscal 2021, before the IRA passed.

Since Trump took office, the IRS has also reportedly decided to cut its free, online tax filing service and paused much of its modernization work. Bessent said that the IRS has cut $2 billion from the IRS IT budget. 

“We achieved these cost savings by eliminating, re-negotiating and de-scoping wasteful IT and professional services contracts and addressing long standing inefficiencies, such as auto-renewed licenses unused for years,” he said, previewing more expected savings from moving the IRS away from paper processing.

Joyce wasn’t the only Republican lawmaker with questions about the administration’s proposed cuts.

“You've already mentioned that we have savings achieved in contracts regarding IT services and this sort of thing. … But you also said that IT remains one of our biggest challenges, particularly within the IRS, so how is it that you're going to operate with a smaller budget that still serves the needs of the American people?” asked the former chair of the subcommittee, Rep. Steve Womack, R-Ark. 

“Part of that has been bringing people back to the office,” Bessent replied. “We think through efficiency gains — the federal government, historically, does not have productivity increases — and as I continually pointed out, DOGE is the office of government efficiency, not the office of government extinction. … So I think that it is not a big leap to do much more with less.”

But Womack questioned whether there were $2.5 billion-worth of efficiencies available to make.

“Smarter IT” and the “AI boom” can enhance the agency’s collection activities moving forward, Bessent told the subcommittee’s top Democrat — Rep. Steny Hoyer, D-Md. — when asked if technology improvements could help justify the personnel reduction at the tax agency. 

Former IRS chief Danny Werfel has previously told Nextgov/FCW that he worries budget cuts and layoffs would impede modernization efforts at the agency. 

“Steve Womack understands,” Hoyer told Nextgov/FCW. “He’s a conservative Republican with common sense and he knows that these expenditures — contrary to what the Republicans like to say, that everything is waste, fraud and abuse … they are spent on legitimate items that need to be done for the American people.”