States Face Downstream Tax Losses From IRS Enforcement Cuts

State and local governments could lose out on billions of dollars in tax revenue as a result of deep cuts to the IRS enforcement budget and mass departures of agency officials, a tax policy researcher told state administrators Tuesday.

A potential $4 billion cut to the IRS enforcement budget—resulting in fewer audits of high-income individuals and corporations—would lead to federal revenue losses of $56.8 billion, according to the preliminary results of an upcoming research paper by Carl Davis, research director for the Institute on Taxation and Economic Policy.

Those losses would flow through to states and ...