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Congress rescinded $41.8 billion in three rounds: $1.4 billion under the Fiscal Responsibility Act of 2023, $20.2 billion in FY2024 appropriations (the Further Consolidated Appropriations Act), and another $20.2 billion in FY2025 appropriations (the Full-Year Continuing Appropriations and Extensions Act).

The Trump administration's FY2026 budget proposes an additional $16.5 billion rescission. The Tax Law Center calculated this would cut total IRS funding 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 reduce federal revenues by $44 billion 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 cover 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. The IRS warned that modernization funds will run out by FY2026, leaving automated taxpayer systems incomplete and cloud infrastructure vulnerable to cyberattacks.

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 reported 18% staff cuts 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 — was $625 billion net in 2021 (the most recent IRS estimate). Most of this gap comes from wealthy individuals and corporations using complex schemes to avoid paying what they owe.