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internal revenue service
Math Versus Musk: Closing the Tax Gap
The value of tax enforcement is such that just accounting for DOGE's cuts to the IRS, DOGE will likely increase the deficit, even if they hit their target of cutting $150 billion in spending.
May 14, 2025
Elon Musk's Department of Government Efficiency's current goal is to cut $150 billion a year in spending from the federal government. One fundamental problem with Musk's approach is that sometimes spending a little more money saves a lot of money, or makes a lot of money. Repairing a hole in a roof in Florida before hurricane season saves money. Regularly changing the oil in your car saves money. For every dollar that the Internal Revenue Service spends auditing the top 10% of earners, it recovers $12 in taxes. A recent Stanford study found that auditing partnerships nets $20 in taxes recovered for every dollar spent by the IRS.
The largest chunk of fraud in America's federal government is the tax gap. The tax gap is the difference between how much is owed in taxes and how much is paid in taxes. For 2022, the IRS estimated that the tax gap was $606 billion. That $606 billion in fraud that tax cheats get away with is equivalent to the total federal income taxes paid by the bottom 90% of earners in America.
For most Americans, like myself, every dollar in wages we earn is reported by our employers to the IRS, our taxes are withheld from our paychecks, and that money is paid to the Treasury as estimated taxes four times a year. So for most Americans, cheating is close to impossible, and our rate of compliance is 99%. But for rich individuals and corporations, our byzantine tax code gives them lots of nooks and crannies to hide their income and avoid paying the taxes they owe, so their rate of cheating can be as high as 55%.
I propose that we not only hire back all those fired workers at the IRS, but double down and spend an additional $5 billion auditing the top 10% of earners and $5 billion auditing partnerships at the IRS to reduce the tax gap by $160 billion.
If we collected 25% more of the tax gap, that would be roughly $150 billion a year, which happens to match the DOGE yearly goal. But DOGE isn't even looking at bringing in more revenue. How can DOGE, whose mission is government efficiency, ignore the biggest chunk of fraud in the federal government? DOGE has actually done the opposite. DOGE has aggressively cut workers from the IRS, targeting those employees recently hired and being trained to go after the worst of the worst of the tax cheats. The Inflation Reduction Act, which former President Joe Biden pushed through Congress, bolstered tax enforcement and modernization at the IRS, and experts being trained to audit the most complex returns were hired less than two years ago, so they were cut as part of Musk's purge of probationary federal employees. Even worse, it has been reported that Musk and President Donald Trump are working on plans to cut staffing at the IRS by half.
The Budget Lab at Yale has estimated that if 22,000 employees are cut from the IRS, the tax gap will increase by $160 billion in 2026. If DOGE cuts half of IRS employees, or 50,000, the Budget Lab at Yale estimated that the tax gap will increase by $203 billion in 2026. So just accounting for DOGE's cuts to the IRS, DOGE will likely increase the deficit, even if they hit their target of cutting $150 billion in spending.
I propose that we not only hire back all those fired workers at the IRS, but double down and spend an additional $5 billion auditing the top 10% of earners and $5 billion auditing partnerships at the IRS to reduce the tax gap by $160 billion. So the score is an estimated increase of $203 billion in fraud for DOGE, $150 billion in deficit reduction for me.
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'This Is Welfare for Billionaire Tax Cheats': Trump IRS Ditches Effort to Close Major Loophole
"Donald Trump is a known tax cheat, and it's clear his core economic agenda is to turn the government into an ATM for his billionaire pals," said Democratic Sen. Ron Wyden.
Apr 18, 2025
The Trump administration quietly announced Thursday that it is abandoning a Biden-era effort to close a loophole that allows large business partnerships to repeatedly manipulate the value of their assets to minimize their tax obligations.
The Internal Revenue Service and Treasury Department announced the decision in a notice that received little attention in the mainstream press. The notice states that the administration, guided by an executive order President Donald Trump signed in February, intends to scrap so-called basis-shifting regulations that were finalized at the end of former President Joe Biden's White House term.
As the Biden Treasury Department explained last year, it was targeting a tactic whereby "a single business that operates through many different legal entities ('related parties') enters into a set of transactions that manipulate partnership tax rules to maximize tax deductions and minimize tax liability."
"These transactions defy congressional intent to avoid tax liability with little to no other economic consequences for the participating businesses," the department said. "For example, a partnership might shift tax basis from property that does not generate tax deductions (such as stock or land) to property that does (such as equipment). Taxpayers may also use these techniques to depreciate the same asset over and over."
The Biden administration estimated that the crackdown on basis-shifting would have raised $50 billion in federal revenue from wealthy taxpayers over a 10-year period.
Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, said in a statement Thursday that "this is a ridiculous loophole that allows the ultra-rich to dodge taxes by shifting assets around on paper while adding zero value to our economy whatsoever."
"Donald Trump is a known tax cheat, and it's clear his core economic agenda is to turn the government into an ATM for his billionaire pals, but that doesn't make it any less outrageous that his administration would reopen this kind of tax loophole for the rich while simultaneously wrecking Social Security and attacking Medicaid," Wyden added. "This is welfare for billionaire tax cheats and massive corporations, plain and simple."
The impending removal of IRS regulations targeting the rich comes as the administration is weaponizing the agency against nonprofits and immigrants and as congressional Republicans work on a legislative package that will likely call for massive tax breaks for the wealthy and large corporations.
A recent analysis by the nonpartisan Joint Committee on Taxation estimated that the GOP tax package could cost $7 trillion over the next decade, notwithstanding Republicans' misleading efforts to make the tax cuts appear free of cost.
While some congressional Republicans have floated the idea of allowing the marginal tax rate for the highest-earners to return to its previous level of 39.6% at the end of 2025, the proposal appears unlikely to garner enough support in both chambers.
"I think it is a mistake to raise taxes, and I don't believe Republicans are going to do that," Sen. Ted Cruz (R-Texas) told NBC News earlier this week.
According toBloomberg, the GOP's tax plan "will almost certainly" reflect "the priorities of a small minority of high-earning constituents in a handful of districts in New York, New Jersey, and California" as Republicans work to raise the state and local tax (SALT) deduction cap.
Bloomberg noted that the SALT deduction "is a write-off that most Americans will never claim, even in the districts of the lawmakers fighting hardest to increase the tax break."
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Earth Day Massacre? Environmental Groups Fear Trump Ready to Take Aim at Nonprofit Status
"The rumors feel credible because this is the playbook they use," said one environmental funder. "That's why people are taking it very seriously."
Apr 17, 2025
Environmental groups are bracing for the Trump administration to potentially target their tax-exempt status, a move that could come down on Earth Day, this coming Tuesday, according to reporting from multiple outlets published Wednesday.
Rumors about such a move are swirling as the Trump administration is also reportedly considering plans to revoke Harvard University's tax-exempt status, a major escalation against the elite institution that critics said marks just the start of a broader assault on nonprofits that refuse to acquiesce to the administration's demands.
Fears that President Donald Trump will try to revoke environmental groups' tax-exempt status is the "rumor of the day that is flying around D.C.," Brett Hartl, the government affairs director at the nonprofit Center for Biological Diversity, toldE&E News. "There's lots of rumors about what terrible thing [Trump] wants to do on Earth Day, to just give everybody the middle finger."
Sources who spoke to Bloomberg Law on the condition of anonymity told the outlet that multiple conservation and environmental groups are preparing and assembling legal teams in response to the rumors. Per Bloomberg Law, a potential order from Trump could also seize groups' funding and designate them as domestic terrorists.
"We are trying to not panic, because we don't know what it is," Hartl told E&E News, though he added that environmentalists would "rally together and support each other."
Kieran Suckling, executive director for the Center for Biological Diversity, told Bloomberg Law that his organization is preparing for a potential order, and said the group would take legal action if it comes to pass.
501(c)(3) tax-exempt organizations, such as the Center for Biological Diversity and Earthjustice, are exempt from federal income tax and can collect tax-deductible donations.
The environmentalist and author Bill McKibben reacted to the reporting by remarking that the threat comes amid the "ongoing decimation of federally funded climate science."
"I know a great many of these people, and I admire their work endlessly; it's an honor to be counted among them, even if I'm only a volunteer," he said of those who work for green groups. "It was perhaps inevitable that Trump and his team would target us; together we've been making life harder for his clients in the fossil fuel industry. And in the new America, if you don't knuckle under you get a knuckle sandwich. Figuratively speaking. One hopes."
Only the Internal Revenue Service can investigate and revoke a tax exemption, and senior executive branch officials are explicitly barred from asking the IRS to conduct or cease an audit of a taxpayer, according to The Washington Post. There are some circumstances under which the IRS may revoke a tax-exempt status.
"Neither the president, the U.S. Department of Justice, the U.S. Department of the Treasury, or the IRS have the ability to revoke the federal tax-exempt status of any entity through executive order or with the mere stroke of a pen," wrote Jeffrey Tenenbaum, a nonprofit attorney, on Thursday.
The procedure for revoking federal tax exemption requires "individual case-by-case IRS audits of each organization, with ample opportunity for the entity to defend itself, and including multiple routes of appeal," he added.
CNN was first to report Wednesday that the IRS—where Trump has installed an ally as interim commissioner—is weighing whether to revoke Harvard's tax exemption, news that came a day after the president suggested on his social media platform Truth Social that "perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting 'Sickness?'"
According to E&E News, this suggestion by Trump in regard to Harvard has heightened environmental groups' concerns that the administration might take action against their tax-exempt status.
"The rumors feel credible because this is playbook they use," one environmental funder, who was granted anonymity, told E&E News. "That's why people are taking it very seriously."
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