IRS Hit With Massive Layoffs

Elon Musk holds a chainsaw at the Conservative Political Action Conference Thursday (Reuters)
Reuters
By Michael Rainey

Good evening. The Senate voted to confirm Kash Patel as the leader of the FBI today in a 51-49 vote, with two Republicans joining Democrats in opposition. An outspoken supporter of President Donald Trump and fierce critic of the FBI, Patel has vowed to overhaul the nation's principal law enforcement agency. Republicans say Patel will seek to transform an FBI that "has been infected by political bias and weaponized against the American people," as Senate Judiciary Chairman Chuck Grassley put it last week. But critics fear that Patel will politicize federal law enforcement to help Trump and punish his enemies. "Mr. Patel's recent political profile undermines his ability to serve in the apolitical role of Director of the FBI," said Sen. Susan Collins, one of the Republicans who voted no.

Layoffs Begin at the IRS

The IRS began firing employees Thursday as part of the Trump administration's aggressive effort to downsize the federal workforce.

The tax revenue agency is expected to lay off approximately 6,700 workers in the coming days, mostly recent hires who are still in their probationary periods. The firings Thursday reportedly include roughly 500 workers in Texas, more than 600 in New York and over 300 each in Georgia, Florida, Tennessee and Pennsylvania. Layoffs are being reported across divisions within the IRS, including collections and tax compliance, and arrive just as tax season swings into full gear. Sources told ABC News that another round of layoffs could occur once tax season comes to an end in April.

Commerce Secretary Howard Lutnick said Wednesday that Trump ultimately wants to eliminate the tax agency. "Donald Trump announced the External Revenue Service, and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay," he told Fox News, referring to Trump's proposal to create a new agency that would collect tariff and foreign tax revenues.

While tax experts say it would be all but impossible to replace U.S. income taxes with tariffs - the tariff rate would have to be 100% or more, so high that imports would plummet as prices double, eliminating the foundation of the revenue - National Economic Council Director Kevin Hassett defended the idea Thursday, telling reporters at the White House that it is "absolutely" a possibility.

A sharp reversal: The IRS had more than 100,000 full-time employees across the U.S. at the end of 2024, according to agency data highlighted by the Federal News Network. That's the highest level recorded in nearly 30 years and comes following a long period of decline amid budget cuts (see the chart below). IRS officials have said previously that they aim to employ about 102,000 people by 2029.

Former President Joe Biden sought to reinvigorate the agency as part of an effort to crack down on tax cheating by corporations and the rich, and the Inflation Reduction Act of 2022 provided $80 billion over 10 years to help modernize the agency and boost employment. But Republicans have successfully lobbied to reduce that funding, which is now about half of what it was, and they are expected to cut even more.

The IRS and many tax experts warn that funding cuts could backfire and cost far more in lost revenues than they deliver in budgetary savings. In one notable example, the Congressional Budget Office estimated that a $20 billion cut in IRS funding would result in a revenue loss of $65 billion, producing a net increase in the deficit of $45 billion.

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Hegseth Tells Pentagon to Find $50 Billion in Cuts to Fund Trump Priorities

Defense Secretary Pete Hegseth has ordered Pentagon officials to find savings and reductions in the budget that could be used to fund President Trump's "America First" priorities, including border security, new submarines and a continental missile shield.

"The Department will develop a list of potential offsets that could be used to fund these priorities, as well as to refocus the Department on its core mission of deterring and winning wars," Deputy Secretary of Defense Robert G. Salesses said in a press release. "The offsets are targeted at 8% of the Biden Administration's FY26 budget, totaling around $50 billion, which will then be spent on programs aligned with President Trump's priorities."

According to The Washington Post, Hegseth is calling for 8% cuts each year for the next five years.

In order to free up the money, the Pentagon will have to reduce spending in existing areas, and that could include layoffs. A Pentagon official told NPR that the Trump administration and its DOGE team have asked for lists of all employees still on probation, a group that it easier to lay off if need be. Another official said as many as 55,000 employees within the Department of Defense could lose their jobs, but no final decisions have been announced.

The Department of Defense is the largest agency in the federal government, with a budget of more than $840 billion. It has more than 750,000 civilian employees and oversees 1.3 million active-duty service members and nearly 800,000 members of the National Guard and military reserves.

Although some critics have called for reductions in defense spending, there are no signs that the Trump administration plans to do anything other than increase the military budget. "I think the U.S. needs to spend more than the Biden administration was willing to, who historically underinvested in the capabilities of our military," Hegseth said earlier this month.

Trump Talks Up DOGE Refund Checks

Just two days ago, the idea of the federal government sending checks to Americans based on the savings that Elon Musk and his DOGE team say they are producing seemed like a long shot, but President Trump said Wednesday that he is interested in the proposal.

"There's even under consideration a new concept where we give 20% of the DOGE savings to American citizens, and 20% goes to paying down debt, because the numbers are incredible," Trump said at an investment summit hosted by Saudi Arabia's sovereign wealth fund in Miami.

The potential checks raise a host of issues, however. While DOGE is currently claiming to have generated $55 billion in "savings," critics can confirm only about 5% of that (see one analysis here). With either tally, those purported savings would do little to fund a national refund program.

The idea also bothers some conservative lawmakers, who want to use any savings to reduce the debt and deficit. "Politically, that would be great for us, send everybody a check," House Speaker Mike Johnson said at the CPAC conference Thursday. "But if you think about our core principles, I think we need to pay down the credit card," he added, referring to the national debt.

Still, as so often occurs, the politics of the proposal may outweigh any economic and fiscal concerns. "[T]here's probably not anything Donald Trump likes better than mailing checks to people with his name on the signature line, as he displayed with his avid support for COVID stimulus checks during the pandemic," says Ed Kilgore of New York magazine. "The intended recipients of DOGE Dividends would really like the idea too; even people who despise and mistrust government know that its checks will clear. So it's a politically seductive idea in the current environment."

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