The IRS Shrank. Will That Lead to More Tax Cheating?

This episode of The Journal explores the dramatic shrinking of the Internal Revenue Service (IRS) under the Trump administration and its potential consequences for tax compliance in the United States. With roughly 30,000 fewer employees than when Biden left office—down to around 70,000—the IRS has seen a significant reduction in enforcement capacity, particularly in audits and criminal investigations. Despite claims of increased efficiency through technological upgrades like AI and digital transformation, the data shows a sharp decline in audits of high-income individuals and complex financial entities, raising concerns that tax cheating may be on the rise. The episode features insights from Wall Street Journal tax policy reporter Richard Rubin, who explains how the IRS’s core functions—audits, collections, and criminal investigations—have been weakened, even as the agency reports higher enforcement revenue due to better targeting. However, experts warn that reduced enforcement undermines the fairness and credibility of the tax system, eroding public trust and encouraging a perception that 'the IRS isn't going to catch me.' The episode also examines the political and ideological underpinnings of the IRS cuts, noting Trump’s long-standing skepticism of the agency and his administration’s prioritization of efficiency over enforcement. While the IRS continues to process returns and issue refunds without disruption, the long-term fiscal impact could be severe: a Yale Budget Lab analysis projects a $643 billion loss in federal revenue over the next decade due to weakened enforcement. The episode concludes with a reminder that most taxpayers—especially those with W-2 income—will not see immediate changes to their refunds, but the broader erosion of tax enforcement threatens the foundational norm of fairness that sustains voluntary compliance. The takeaway is clear: a weakened IRS doesn’t just mean fewer audits—it risks unraveling the social contract of tax honesty.