Congress guts $42 billion from IRS while wealthy tax cheats keep $625 billion

The Inflation Reduction Act of 2022 provided $79.6 billion to the IRS through 2031: $45.6 billion for enforcement, $25.3 billion for operations, $4.8 billion for modernization, and $3.2 billion for taxpayer services.

Congress rescinded $42 billion total in three rounds: $1.4 billion in the Fiscal Responsibility Act of 2023, $20.2 billion in FY2024 appropriations, and $11.7 billion in the Senate Labor-HHS bill targeting IT modernization funds.

The Trump administration's FY2026 budget proposes an additional $16.5 billion rescission. The Tax Law Center calculated this would cut total IRS funding by 54% by FY2027, including a 65% cut to operations support and a 50% cut to enforcement.

The Congressional Budget Office estimated that a $20 billion rescission of IRS enforcement spending could result in a $44 billion drop in federal revenues from FY2024 to FY2034. Every dollar cut from enforcement costs the government more than two dollars in lost revenue.

The IRS spent $9 billion of IRA funds through September 2024, but diverted $2 billion to pay for routine expenses because annual congressional appropriations weren't sufficient to cover inflation.

After the IRA passed, Congress zeroed out the annual appropriation for IRS modernization, claiming IRA funds would cover it. But the IRS warned that modernization funds will run out by FY2026.

Eleven percent of IRS workers accepted buyouts or were laid off in February 2026. A court injunction later reinstated the laid-off workers on administrative leave. The 🌲Washington Post reports 18% staff cuts are planned by mid-May, though Treasury Secretary Scott Bessent denies final decisions have been made.

The IRS used AI and advanced analytics to launch 60 audits on corporations with average assets exceeding $24 billion and 76 examinations of the largest partnerships in the U.S. These efforts require skilled staff to follow up, which the cuts would eliminate.

The annual federal tax gap, the difference between taxes owed and collected, averages $625 billion per year. Most of this gap comes from wealthy individuals and corporations using complex schemes to avoid paying what they owe.