In my last post, I included a
chart showing where the federal debt would be if Congress had not enacted the
Bush and Trump tax cuts. Long story short, we would have a very manageable debt
burden. Today, I want to focus on a related issue, namely, the underfunding of
the IRS and how much money that is costing you and me.
On September 16, 2026, the New
York Times ran an article by Andrew Duehren, a reporter who covers tax
policy and the IRS, in which he explains that the Trump administration has held
up publication of an annual Internal Revenue Service estimate of unpaid taxes, “a
delay that could mask the fiscal cost of the steep decline in the agency’s
ability to audit the rich.”
Nothing new here. The Trump
administration has withheld several reports on statistics that reflect
unfavorably on its policies, if you can call them that. Duehren points out that
the tax gap estimate has been released sporadically over the years, but during
the Biden administration, the IRS started releasing it annually at the request
of members of Congress from both sides of the aisle.
The most recent report, for the
year 2022, estimated that roughly $700 billion in owed taxes went uncollected,
although it figured about $90 billion would eventually be paid. That’s a pretty
big chunk of change, even when the annual deficit for that year exceeded $1.4
trillion. In fact, it’s almost half of the deficit.
Duehren explains that income with
third-party verification, like wages, is almost always paid. The tax gap
between what is owed and what it actually collected results largely from self-reported
income, such as business profits. No surprise there. So, what we have is the
ordinary worker in America paying an honest tax, while many business owners,
including the president, are tax cheats. (And Trump has recently tried to
arrange a deal with the DOJ in which he and his family will never be audited by
the IRS. Gee, I wonder why.) To compound the problem, the Trump administration
has slashed about a quarter of the IRS workforce, so the agency no longer has
the staff to audit many of these tax cheats. This move goes hand-in-glove with
Trump’s repeated pardoning of criminals convicted of fraud, usually exempting
them from having to repay the victims they defrauded. The result is the same:
the wealthy cheat the system, and the ordinary citizen is harmed.
The tax gap number is, of course,
a shot in the dark, because it’s hard for the IRS to count income that hasn’t
been reported, but the tax gap estimate comes from past audits that are then
extrapolated for the most recent year. Not an exact science, but we can be sure
that the number is very large. “For a time,” says Duehren, “there was
bipartisan interest in giving the I.R.S. more resources to narrow the tax gap,
since doing so generates more tax revenue for the government without having to
raise taxes.” You would think that the Republicans would be all in favor of getting
revenue without raising taxes. But “that changed after Democrats approved an
additional $80 billion for the I.R.S. in 2022.” Republicans started attacking
the agency and clawed back much of that $80 billion. “Republicans didn’t like
that it really points the finger at the wealthy as being the problem,” said
Barry Johnson, who was chief data and analytics officer at the I.R.S.
And this points to the heart of
the problem. The GOP would love to get more money for the country without
raising taxes, but not if that means auditing billionaires and business owners.
Anyone who thinks the Republican Party of today represents the little guy in
America should just follow the money. We’ve had three massive and unnecessary tax
cuts that benefited primarily the wealthy, and now the GOP has slashed funding for
the only government agency that actually brings in more revenue than it spends.
When the Democrats are in control,
the Republicans scream about the debt. But when they are in charge, they do
everything in their power to put more money in the hands of the wealthy, even
if it means ballooning the debt to unheard-of levels. We just shot past $40
trillion, but do we hear Republicans offering to reverse their Big Ugly
Billionaire Bill Act (BUBBA)? Not a snowball’s chance in hell.
