The Washington Post reported that unnamed IRS officials are projecting a huge $500 billion drop in tax revenue this year due to DOGE's cuts to enforcement.
I'm not buying that argument, and here's why.
The IRS argues that if people think there's less tax enforcement, they won't pay up.
But audit rates are already super low - less than 1% overall.
So, would slightly reducing these already tiny percentages really cause a 10% revenue collapse?
No.
Here's what most people don't realize:
Compared to the rest of the world, Americans are very honest.
About 85% of taxes owed are paid voluntarily, without the IRS doing anything.
All their enforcement efforts only bump that number to 87%.
That said, if I were running DOGE, I wouldn't start by cutting the government's revenue-generating arm.
Instead, I'd invest in technology.
The IRS systems are ancient. This makes complex audits of the wealthy and big businesses super inefficient.
With proper tech investment, they could do more audits with fewer people through automation.
The IRS already does great when information is reported electronically, like with W-2s.
They can automate notices and adjustments based on that data.
On the other hand...
Here's a troubling stat that could back up the idea that tax compliance will drop a lot:
An Intuit Credit Karma survey found that 17% of millennials are considering not filing taxes this year, believing their audit risk is lower due to IRS cuts.
The psychological deterrent of enforcement might matter more than actual audit rates.
If people believe the IRS is vanishing, that perception alone could hurt compliance.
But a 10% drop?
I don't think that's backed by any evidence. And these IRS officials are just trying to protect their budget and their jobs by speaking anonymously to the press.
What we need isn't more auditors. What we need is smarter systems that catch discrepancies automatically.
That would boost revenue without the huge price tag of traditional enforcement.
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