Experts warn of lost revenue, weakened trust, and growing inequality amid historic cuts to the IRS and looming tax policy shifts.
As tax season draws to a close, the Internal Revenue Service is undergoing one of the most dramatic shakeups in modern U.S. history. Under the newly formed Department of Government Efficiency (DOGE), led by billionaire Elon Musk, the IRS is slashing 18% of its workforce by late May. While the move is touted as a bold leap toward cost-cutting and modernization, tax experts warn that what’s being framed as “efficiency” could instead lead to deep, long-term fiscal wounds—particularly for immigrant communities and the working class.
At the same time, a Republican-controlled Congress is pushing to extend the 2017 Trump-era tax cuts—legislation that disproportionately benefits the wealthiest Americans and is estimated to add $4 trillion to the national debt over the next decade. Together, these developments set the stage for a widening wealth gap and shrinking trust in one of America’s most foundational institutions: the IRS.
At a recent policy briefing hosted by the American Community Media (ACoM), a panel of leading tax scholars and former government officials painted a sobering picture of where this path leads. Among them were Natasha Sarin of Yale University and The Budget Lab, Michael Kaercher of NYU’s Tax Law Center, Richard Prisinzano of The Budget Lab, and Aravind Boddupalli of the Tax Policy Center. Their analysis made clear that this is not just a bureaucratic reshuffle—it’s a turning point with potentially devastating implications for economic equity and the American social contract.
Revenue in Retreat: The High Cost of Cuts
Sarin, who previously served in the Treasury Department, explained that the IRS is responsible for collecting roughly 97% of all federal revenue, projected at $5 trillion this year. Yet just as the economy demands greater oversight and smarter enforcement, the agency is being stripped of its most capable auditors—many of whom specialize in uncovering tax evasion among the wealthiest Americans.
“We’re already losing about $700 billion in uncollected taxes annually,” Sarin said. “And a third of that comes from the top 1%—the very people who can exploit loopholes and avoid audits.” These are exactly the cases that require deep expertise and skilled manpower—the very kind being laid off.
The initial wave of layoffs—7,000 probationary employees—disproportionately affects staff focused on high-dollar tax enforcement. According to Sarin, every hour spent auditing wealthy individuals was yielding $4,500 in recovered revenue. Letting these specialists go isn’t just shortsighted—it’s self-defeating.
If enforcement continues to erode, Sarin and Prisinzano estimate the country could lose anywhere from $400 billion to $2.4 trillion in federal revenue over the next decade. That’s not belt-tightening; that’s bleeding. These numbers represent more than statistics. They translate into real-world consequences: fewer resources for public education, infrastructure, healthcare, and job training programs that directly benefit low- and middle-income Americans—including many immigrants.
Tax Cuts for the Wealthy, Sacrifices for Everyone Else
Michael Kaercher of NYU added crucial context to the fiscal reshuffling now underway. As the expiration date for the 2017 tax cuts approaches, Congress is preparing yet another round of tax relief for corporations and high earners—potentially totaling $5 trillion. Half of the proposed benefits, Kaercher noted, would flow to the wealthiest 5%.
What makes this particularly galling is the budgetary sleight of hand being used. Lawmakers are basing their math on the assumption that temporary tax cuts are already permanent, thereby eliminating $3 trillion in costs—on paper. But the real-world costs remain, and without meaningful offsets, they could result in devastating cuts to programs like Medicaid and SNAP, essential lifelines for millions of low-income families.
Even if low-income households see small tax breaks under the proposed plan, those savings are likely to be erased—and then some—by the loss of health coverage, food assistance, and other safety net services.
For immigrant families, many of whom are working in sectors hit hardest by inflation and stagnant wages, this could represent a double blow: less help from the state, and fewer protections in times of need. The result? Greater economic precarity, lower rates of home ownership, and rising disparities in health and education outcomes.
When Tax Collection Becomes Immigration Enforcement
Perhaps the most disturbing development discussed was the IRS’s new data-sharing agreement with Immigration and Customs Enforcement (ICE). For decades, IRS policy maintained a strict firewall between tax collection and immigration enforcement. That wall is now crumbling, and the fallout may be especially severe for undocumented immigrants.
Aravind Boddupalli, Senior Research Associate at the Tax Policy Center, warned that this change endangers not only individual lives but the integrity of the entire tax system. “These individuals already contribute over $60 billion a year in taxes—often without any access to the benefits those taxes fund,” he said. The breach of confidentiality could drive many out of the formal tax system altogether, resulting in an additional $26 billion in lost revenue this year alone.
Boddupalli also highlighted the broader implications: fear. Long before these changes were enacted, immigrant families were already stepping back from public life due to fear of targeting. Now, with taxpayer information potentially being used for deportations, we may see even greater disengagement—from healthcare, from education, and from filing taxes at all. “When any taxpayer is afraid,” he said, “we’re all worse off.”
In effect, the United States risks creating a two-tier tax system: one for the powerful who can dodge oversight, and another for the vulnerable who are asked to comply without protection.
The Immigrant Cost of a Shrinking State
At its core, this is not simply a matter of dollars and deficits. It is a moral reckoning. The American tax system was built on the idea of shared responsibility and fairness. Undocumented immigrants, despite being excluded from many of its benefits, have long participated in this system. But now, as revenue enforcement wanes and tax cuts flow upward, we may be trading that spirit of collective obligation for something far more cynical.
And immigrants, yet again, are caught in the crossfire—asked to contribute without protection, to trust a system that increasingly treats them as expendable.
As Natasha Sarin concluded, “Once taxpayers start to believe that paying your fair share is optional, the entire system begins to fray.”
At The Immigrant Magazine, we believe that fair taxation, effective governance, and the protection of vulnerable communities are not mutually exclusive goals. We can—and must—do better.
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