IRS Staffing Cuts Will Reduce Revenues, Driving Deficits Higher
Over the past year, the Internal Revenue Service (IRS) experienced the most significant personnel contraction in its history. That reduction means that the agency is unable to perform the same level of enforcement activities, which will reduce federal revenues. The deficit impacts are huge, with one recent analysis showing that cuts to IRS personnel could mean hundreds of billions of dollars in foregone revenue and, therefore, higher debt.
What Does the IRS Do?
The IRS is tasked by Congress to serve American taxpayers and to enforce federal law, all for the purpose of collecting tax revenues for the federal government. IRS personnel play a central role in ensuring that federal revenues are collected by answering taxpayer questions about filing, executing changes to the tax code, and enforcing tax law through audits and investigations. In 2025, the IRS received more than 100 million phone calls, processed 165 million individual income tax returns, and delivered 104 million tax refunds, according to the National Taxpayer Advocate. That same year, the agency facilitated the collection of $5.0 trillion in taxes.
How Much Has the IRS Workforce Declined?
The number of IRS personnel remained relatively stable from 1998 through 2011, but the workforce began to decline in the 2010s as Congress appropriated fewer funds to the agency. According to the Congressional Budget Office, the decline in IRS funding and staff led to a decline in IRS law enforcement activities. The amount of additional tax required after audits fell from $63 billion in 2010 to $32 billion in 2018 (adjusted for inflation to 2023 dollars). In 2017, the IRS workforce fell to 73,000, its lowest level since at least 1995.
In 2019, the Government Accountability Office found that the IRS faced several workforce-related challenges that “pose risks to meeting its mission” and result in “billions of dollars in taxes [going] unpaid every year.” To address the structural challenges facing the agency, lawmakers provided $80 billion to the IRS over ten years through the 2022 Inflation Reduction Act (IRA). With the new funds, the IRS was able to begin to rebuild its workforce.
However, since the IRA, a series of funding rescissions and executive-wide workforce reductions led to a significant drop in IRS personnel in recent months.
The NTA warns that the 2025 staff reductions may impact the ability of the IRS to properly administer the 2026 filing season. This year, in addition to its regular activities of responding to taxpayers’ questions and processing filings, the IRS must also update systems to reflect recent changes in the tax law. The One Big Beautiful Bill Act made more than 100 changes to the tax code, many of which are complex, according to the NTA. Overall, the agency lost 28,312 employees from January 2025 through March 2026, including significant losses in the number of internal revenue agents and officers as well as contact representatives.
IRS Personnel Loss is Projected to Decrease Revenues, Adding to the Deficit
At the start of the reduction-in-force (RIF) in early 2025, the Budget Lab at Yale estimated the revenue effect of reducing the IRS workforce. The Budget Lab found that a 22,000 RIF at the agency would reduce federal revenues on net by $198 billion from 2026 through 2035. A 43,000 RIF would shrink revenues by $286 billion over the same period. However, the Budget Lab also estimated the effect that a sizeable RIF could have on taxpayer behavior, as less law enforcement activity by the IRS could reduce voluntary taxpayer compliance. The Budget Lab estimates reduced taxpayer compliance due to a 22,000 RIF could decrease revenues by $1.9 trillion over ten years.
Increasing IRS funding to provide for additional enforcement activity either through more staff or improved technology would increase revenue collections, thereby reducing deficits. A recent study found that for every additional $1 spent auditing taxpayers above the 90th percentile, revenues increase by more than $12. For audits below the median income, revenues increase by $5. That means that providing more funding for the IRS to perform its audit function more than pays for itself. Additionally, IRS taxpayer engagement increases taxpayer compliance and revenue collection.
Conclusion
Reductions in IRS personnel decrease federal revenues, increase deficits, and significantly exacerbate the gap between taxes that are owed and taxes that are actually paid. Increasing IRS funding and personnel would help to shrink the tax gap, promote fairness in the economy, and be a step toward addressing America’s structural mismatch between spending and revenues.
Photo by Brandon Bell/Getty Images
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