Trump White House Floats $2.5 Billion in Cuts to IRS Budget (1)

President Donald Trump proposed cutting almost $2.5 billion in annual funding from the IRS in his so-called “skinny budget” released Friday.

A wishlist to Congress of presidential priorities, the administration’s budget is a broad outline of his vision.

The “skinny budget” was light on details as Congress prepares to quiz administration officials next week on annual government funding plans.

It includes a swath of cuts to renewable energy, education, and foreign aid programs—slashing about $163 billion in government programs. Congress in the coming months will haggle over which parts of the plan will be turned into law. It would apply to fiscal year 2026, which starts Oct. 1, 2025.

The document said “the elimination of certain complex tax credits and technology improvements would increase IRS efficiency. The reduction would protect functions in Taxpayer Services.”

The Trump administration targeted the IRS cuts in part by citing the Biden administration’s addition of 19,000 employees during the last fiscal year and implementation of reporting requirements for e-commerce transactions above $600. Congress funded the IRS with $12.3 billion last fiscal year.

While the IRS hired close to 20,000 employees, almost 10,000 left the agency in fiscal year 2024, according to the latest National Taxpayer Advocate report.

The e-commerce reference suggests that codifying a higher 1099-K threshold could yield on-paper savings by alleviating the agency’s administrative burdens, said Andrew Moylan, vice president of public finance at Arnold Ventures.

“The $600 threshold was a problem on both sides of the coin,” Moylan said. “It would trigger huge amounts of paperwork for relatively routine transactions of money between individuals, huge percentages of which is not in fact taxable income. It would also trigger a flood of forms for the IRS to sift through.”

Congress Has Next Move

The request marks the beginning of negotiations with Congress, which will need to sign off on any changes to the IRS’s discretionary spending before it can take effect.

Appropriations are subject to the de facto 60-vote threshold in the Senate, giving Democrats in the minority more say over this package than they do in the budget reconciliation process Republicans are using to expand individual and business tax breaks.

Democrats assailed the proposal, calling it an invitation for the wealthy to evade taxes.

“The Trump budget would be a boon to tax cheats on the backs of hardworking American taxpayers,” said Sen. Jack Reed (D-R.I.), the ranking member on the Senate Appropriations subcommittee that oversees the IRS’s budget. “That is why it has zero percent chance of passing as is.”

The top House appropriator in charge of IRS funding said it was a justified reversal of Biden-era largess.

“President Trump’s budget request reflects his promises to right the wrongs of the previous Administration at a time when our nation is on a bloated and unsustainable economic path,” said Rep. Dave Joyce (R-Ohio), the head of the Appropriations Subcommittee on Financial Services and General Government. “Specifically, within IRS, the budget focuses on supporting taxpayers through better customer service.”

Additional tax proposals will come later, a senior official at the Office of Management and Budget told reporters on condition of anonymity.

“This request has come to Congress late, and key details still remain outstanding,” said Senate Appropriations Committee Chair Susan Collins (R-Maine). “The Appropriations Committee has an aggressive hearing schedule to learn more about the President’s proposal and assess funding needs for the coming year.”

The potential cuts come as the IRS faces unprecedented turmoil with an exodus of senior leadership and the impending departures of about a quarter of the rest of the agency workforce.

Annual agency funding is separate from the $80 billion the IRS got in the Democrats’ 2022 tax-and-climate law, of which Republicans have succeeded in clawing back tens of billions of dollars.