IRS Budget Cuts Cost US Government Billions in Tax Revenue Each Year

President Joe Biden will seek an extra $80 billion to fund U.S. tax collections that would help pay for his plan to bolster childcare, universal pre-kindergarten education and paid leave for workers.

The president’s proposal to boost the Internal Revenue Service’s (IRS) budget over 10 years would help the agency curb tax evasion by increasing and better targeting audits of high earners and large corporations.

A report from the Transactional Records Access Clearinghouse (TRAC), a data gathering, data research and data distribution organization at Syracuse University, shows that IRS budget cuts cost the U.S. government billions in tax revenue each year.

At a time when Americans face growing economic inequality and financial hardship caused by the COVID-19 pandemic, the IRS is letting billions of dollars in tax revenue slip through its fingers because budget and staffing cuts have left the agency incapable of fairly and effectively auditing the 637,212 millionaires now living in the United States.

The report analyzed IRS audit data from fiscal year 2012 through fiscal year 2020 and found dramatic declines in audits and declines in the amount of taxes recovered for the American people:

• The number of IRS revenue agents is down by 43% since 2010 due to budget cuts. Fewer agents means fewer audits.
• Even though the number of taxpayers reporting over $1 million has doubled in the past eight years, audits of millionaires have fallen to just 25% of their previous number. Fewer than 2% of taxpayers reporting over $1 million are audited.
• IRS audits of millionaires recovered $4.8 billion in 2012, but only $1.2 billion in 2020.
• Eight years ago, nearly all companies reporting more than $20 billion in assets were audited, which recovered $10 billion in unreported taxes. In 2020, only a third of those companies were audited, recovering only $4.1 billion.
• Just 533 cases were prosecuted for tax crimes in court in 2020—the lowest on record.

Susan Long is an associate professor of managerial statistics and director of TRAC’s Research Center. A professor in Syracuse University’s Whitman School of Management, Susan is a Freedom of Information Act (FOIA) pioneer who has specialized in federal enforcement issues for more than 25 years.

Long provided the following context: “Our analysis of IRS data shows the enormous impact of budget cuts at the agency. The IRS is recovering only a fraction of the unpaid taxes it recovered less than a decade ago, even though there are more millionaires than ever. At a time when most Americans are suffering from the economic consequences of COVID-19 and economic inequality is growing, the fact that so many of America’s wealthiest people are able to avoid scrutiny is cause for concern.”

Members of the media seeking further information or with a request to speak with TRAC researchers may contact:

Joshua M. Grossman ’03
Director of Media Relations, Division of Communications and Marketing
T 202.227.9250 | jmgrossm@syr.edu