Since President Donald Trump took office, the IRS has faced transformative changes, including a substantial reduction in its workforce and the appointment of seven different commissioners or acting commissioners. These actions, alongside controversial moves like challenging the nonprofit status of Harvard University and sharing of taxpayer information with the Department of Homeland Security, are presented by Trump and his allies as efforts to restore the IRS’s impartiality.
Yet, these changes have cast uncertainty over the agency’s future, especially with the looming tax season. With its crucial role in collecting over $4 trillion annually for government services, the IRS is grappling with understaffing and enforcement hurdles. In this video, we delve into the IRS’s current state, eight months into Trump’s second term.
Video features:
- Danny Werfel, former IRS Commissioner
- Ajay K. Mehrotra, Professor of Law, Northwestern Pritzker School of Law
Erin Slowey , tax reporterErin Schilling , tax reporter
This transcript was produced by Bloomberg Law Automation.
Narrator: Bashing the IRS has always been a go-to punchline. Ooh, look, Homer, the IRS. Boo! I’m crazy enough to take on Batman, but the IRS? No, thank you. Is it any wonder that everyone hates the IRS? It combines two of the things that we hate the most in life: someone taking our money and math.
But where would our nation be without the IRS? Something like 97% of all the money that comes to the U.S. government is collected through the IRS. It ends up being more than $4 trillion a year. And those funds are used to pay for government services.
Narrator: Danny Werfel was the IRS commissioner who left when Trump took office. Werfel says the IRS has two main responsibilities.
Werfel: One is to help you, the taxpayer, meet your tax obligation.
Narrator: Number two, collect taxes and issue refunds. But collecting taxes is hard to do when your agency is understaffed.
Werfel: When you don’t have enough people at the IRS, you can’t launch efforts to scrutinize areas of tax evasion or tax delinquency.
Narrator: A 2023 report from the Senate Finance Committee found that nearly 1,000 millionaires failed to file tax returns over multiple years, potentially owing an estimated $34 billion in taxes. Funding from the 2022 Inflation Reduction Act, signed by President Biden, was going to fix that.
Erin Schilling: It was a big boon for them, and they were planning to use it to increase enforcement and speed up modernization efforts.
Narrator: By the end of 2024, the IRS workforce was the highest it had been in nearly 30 years. Enter President Donald J. Trump.
Trump (News Clip): How about just no tax?
Schilling: Trump and other Republicans thought that the IRS got too much money with the Inflation Reduction Act. They thought too much was going to enforcement.
Trump (News Clip): On day one, I immediately halted the hiring of any new IRS agents.
Schilling: Since he has taken office, we have seen massive turnover with senior leadership at the IRS, and we’ve seen huge amounts of the agency leaving.
Erin Slowey: It’s roughly 26,000 people have left the IRS.
Narrator: It’s even been a challenge keeping a leader in place. This is Billy Long. He was Donald Trump’s choice to lead the Internal Revenue Service. Long replaced this guy (Michael Faulkender), who replaced this guy (Gary Shapley), who replaced this woman (Melanie Krause) after she quit. She served after this fella (Douglas O’Donnell) retired, who was appointed after Werfel resigned, with three years left in his term after Trump announced he would nominate Long.
Werfel: In that moment, it is, in my opinion, equivalent of getting fired.
Narrator: After less than two months on the job, Long was out. Trump named Treasury Secretary Scott Bessent the acting director. That makes seven different people running the IRS in less than eight months. But staffing and enforcement aren’t the only changes at the IRS.
Scott Bessent (News Clip): I believe through smarter IT, through this AI boom, that we can use that to enhance collections.
Slowey: We know the Treasury Department has really been hyping on tech as being the way that they’re going to replace employees and kind of help fill that gap.
Schilling: We haven’t seen the modernization efforts sort of kick in yet.
News Clip: The IRS has made a deal with Homeland Security to share private taxpayer information with immigration officials.
News Clip: The IRS is planning to give a team member of DOJ access to sensitive taxpayer data.
Schilling: Taxpayer privacy has been a major pillar of the IRS for a very long time, and it was alarming to some IRS officials when Treasury and the Department of Homeland Security reached a deal to allow DHS taxpayer information of immigrants for criminal investigations.
Werfel: Tax code’s very clear. It instructs the IRS, you are not allowed to share taxpayer information outside of your walls, except in very specific exceptions.
Narrator: Ultimately, determining which circumstances the IRS is allowed to share taxpayer data...
Slowey: Will be put up to the courts.
News Clip: President Trump in the Oval Office, musing to people about, why can’t we use the IRS to go after folks?
News Clip: The president telling the country’s oldest university, quote, we are going to be taking away Harvard’s tax-exempt status.
News Clip: This means that the administration would be reviewing the tax-exempt status of left-leaning nonprofit groups, targeting them with anti-corruption laws.
Narrator: There’s a long history of accusations that the IRS is being used as a political weapon.
Schilling: In the 1970s, President Richard Nixon tried to use the IRS and weaponize it against his political enemies, and that was very unpopular. The IRS commissioner refused to do it, and Congress passed a law preventing presidents from being able to use the agency to audit individual taxpayers.
Prof. Ajay Mehrotra: Trump is, at this stage at least, is not doing that.
Host: That’s Ajay Mehrotra. He’s a professor of law and history at Northwestern University.
Ajay Mehrotra: Instead, he’s just undermining the IRS and its effectiveness.
Narrator: And then there’s Trump’s and the Republicans’ big tax bill.
Slowey: The big, beautiful bill was signed July 4th. There were some extensions to the business deductions, and also they extended the child tax credit, and they ended some of the energy credits early as well. With the huge exodus of staff, there’s this question of, does the IRS still have the expertise to be able to implement some of these potentially complicated provisions ahead of filing season? A lot of what we’ve heard is, is the IRS gonna be able to do more with less? And I think what it comes down to is, they’ll probably be doing less with less.
Mehrotra: I mean, I guess on one level, it is about undermining and dismantling and limiting the powers of the IRS.
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