Under the Inflation Reduction Act (IRA) of 2022, Congress provided the IRS with the largest infusion of additional funding in its history. Of the $80 billion in additional IRS funding budgeted over a 10-year period, more than half of the allocation was targeted to improve tax enforcement efforts and reverse the erosion of the agency’s capacity to audit complex returns and collect revenue. Tax revenue in the form of individual and corporate income, payroll, excise, estate and other taxes and duties comprises virtually all of the almost $5 trillion in total revenue that funds the federal budget.
However, since Republicans regained control of the House in 2023 and continued into 2024 and2025, the shifting political winds have resulted in Congress’ claw back of more than $20 billion of the IRS' IRA funding. There is little disagreement that the cuts in IRS hiring, coupled with layoffs, reassignments and early retirements, have impaired the IRA’s goal of more effectively and fairly enforcing the tax law and improving taxpayer services.
Looking past the inevitability that reduced tax enforcement will depress the government’s revenue collection ability (producing even larger budget deficits), an understandable reaction might be that that less aggressive tax enforcement by the IRS can only be considered a good thing. Taxpayers whose audits have been dropped in midstream because of examiner departures or reassignments certainly will agree.
But there is another side to the story. With a shrinking budget, a reduced workforce and a brain drain resulting from more experienced IRS personnel opting to leave the agency, the focus on large, complex audits of high-wealth taxpayers may succumb to the practical need to enforce easier, lower-cost audits. For the vast majority of taxpayers, this is not a positive development because the simple reality is that more capable tax enforcement is certain to be fairer tax enforcement, and the little fish may bear the brunt of the IRS’ impeded ability to go after the bigger fish.
In a recent interview with The National Law Journal, I pointed out that working with experienced IRS examiners usually makes the audit process smoother. They know not only when to push but also when to concede—especially if a taxpayer has done a solid job documenting their case. That kind of professionalism comes from experience and confidence, and it’s getting harder to find as seasoned employees leave the agency.
The Trump administration has now gone a step further in its downsizing agenda by announcing its intention to eliminate the Department of Justice Tax Division and redistribute its personnel to regional U.S. attorneys’ offices. In addition to playing a pivotal role in handling high-stakes criminal and civil tax cases, DOJ Tax also works to ensure consistent application of the tax law across jurisdictions and coordinates a centralized national tax litigation strategy. Without it, we risk losing unified national approach, and tax outcomes may depend more on geography than fairness. Whether on the part of the IRS or DOJ Tax, consistent treatment of similarly situated taxpayers is essential to a taxing system that still largely relies on voluntary compliance.
Cutting IRS funding might sound like a win for taxpayers in the short run, but in the long term, it risks making the system less fair, less effective and more frustrating for everyone who plays by the rules. It also impedes the IRS’ ability to implement long-awaited reforms, a number of which would have benefited taxpayers, such as simplified procedures, upgraded technology and enhanced dispute resolution alternatives.
All in all, the rollback in IRS enforcement is more than just a budget issue; it’s a step back from modernizing the agency and making the tax system more equitable. With less money and fewer skilled workers, the IRS is being forced to delay improvements and rethink its enforcement strategies. This could open the door to more unchecked tax avoidance—particularly among those best equipped to game the system. The funding cuts represent not just a fiscal shift but a retreat from efforts to ensure that the IRS is a credible and effective tax authority.
Philip Karter chairs Chamberlain, Hrdlicka, White, Williams & Aughtry’s tax controversy practice and serves as the managing shareholder of the firm’s Philadelphia office. He is also a former trial attorney with the Department of Justice Tax Division, where he represented the IRS in civil tax litigation matters.
Reprinted with permission from the July 11, 2025, edition of The Legal Intelligencer © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.