[munk-a]

Defunding the IRS is nothing but an effort to reduce tax enforcement. People that have relatively straightforward finances can be trivially audited in a formulaic way with data that's on hand - a lack of human auditing resources tends to benefit those with more complex finances which also tend to be the people with a lot of money who can afford to lobby for less enforcement funding.

Also for reference, in 2024 the IRS had a rate of return of 415:1, they'll obviously target the lowest hanging fruit first but for every dollar of funding received they collected 415 dollars of tax revenue that would have been missed. This is an obscenely efficient organization.

[Traster]

Implied in your statement - it benefits those who can create more complex financial situations. Often the complexity of the situation is largely synthetic.

[munk-a]

I agree that the complex financials are generally intentionally created for sheltering and that complexity is only possible because of our overly complex tax code which has been made significantly more complex by tax preparer lobbyists from Intuit and others.

[netsharc]

The reflex when people hear "complex" in this era: "Can we use AI for it?".

Next month's headline: "IRS signs 200-million dollar deal with Grok to use AI to analyse tax returns, determine who gets audited".

[akdev1l]

You’re thinking too far behind. They can just use the AI to generate what your taxes would’ve been.

Just have a script with “what are the taxes owed by $name” and print the output

I’ll take $5M now and you can own 50% of my startup: GenTaxAI

[munk-a]

Impossible - such a script would invalidate the need for Intuit and Intuit is critical for national security or something.

[oarla]

I suspect something like this may already be in place.

[yibg]

In both cases though, mostly rich people.

[jandrewrogers]

That “415:1” is misleading and manipulative. The target rate of recovery is ~10:1, which is roughly what the IRS actually achieves.

Audits are not an infinite money glitch. I used to work for a Federal audit agency that also recovered ~10:1. The reason we target 10:1 recovery on audits is because the return on funding additional audits beyond that falls off very sharply. Furthermore, more aggressive auditing greatly increases compliance costs which ultimately come back as costs to the Federal government, so the net recovered revenue is even less than the headline figure.

Audit recoveries tend to be about sloppy compliance, not people trying to cheat the system. People with more complex taxes are more likely to screw up the exponentially more complex compliance aspects. Auditors are mostly fighting entropy.

[munk-a]

I'll admit - the 415:1 was pulled from an article detailing information from 2024 but the main point isn't the actual value but the fact that it's more than 1:1. When the IRS receives more funding the US government gets more money than what it is budgeting - this doesn't scale to infinity, at some point you'll have nearly complete auditing capture and more budget will just be burning money but we're no where near that point.

Putting money into the IRS is basically a free money printer for the US government and it's only deep corruption that keeps it so poorly funded.

[jandrewrogers]

There are substantial indirect costs not accounted for in that ratio. Anywhere close to 1:1 is a large net loss to the government. Your mental model of the cost effectiveness of audits completely ignores large second-order effects.

The Federal government has a century of empirical data on this. They set their targets accordingly, which as a heuristic is roughly optimal at around 10:1. This may not be intuitive to you. It wasn’t to me either until I worked at a Federal audit agency. Most of it actually makes sense once you understand the bigger picture.

[IG_Semmelweiss]

Second order effects is where the real damage is done.

That extra tax specialist could have been an additional production line worker, which would have created volume, which would have lowered prices, which would have made inputs for other goods cheaper, etc.

It is really wild when you think at a macro level, how much value is destroyed, all due to indirect costs which are extremely difficult to estimate.

[sokoloff]

They already have another money printer that they’re perfectly happy to rely on, at least for the time being.

[mvdtnz]

Which is...?

[munk-a]

Inflation! Just use the money printer to print more money! Subsidy checks for everyone! Unexpected bonus checks for military personnel, brand new accounts for children with money that needs to be invested in an approved stock market index fund, throwing even more money at DHS and the DoD budgets!

How will we pay for it? Debt or printing money!

[stephen_cagle]

Is that 415:1 the rate of return of an audit, or the expense:revenue ratio of the IRS as a whole? I remember hearing some time ago that the expense ratio was 11% for the IRS? But 415:1 is way way less than 11%.

[conductr]

Captured revenue : cost to capture (could be an audit, billing for interest/fees due, etc. lots of avenues to capture revenue that is being missed).

The problem is these metrics aren't really scalable productivity metrics. If you doubled cost, it might go to 100:1, if you tripled cost, it might go to 0.5:1

Each dollar generally gets more expensive to capture.

[jandrewrogers]

A key point is that there are large indirect costs that scale up rapidly that are not accounted for in these direct costs. These costs show up on the balance sheet somewhere else in the government, which makes the ROI for the auditors look much better than it actually is.

This is well-understood by the Federal government. When they set their targets they fully account for the growth of indirect costs created by the audit activity that don’t show up in the ratio.

[stephen_cagle]

Good point, and kind of interesting in that as we keep cutting funding to the IRS, this ratio will probably get wider (which looks good, but is actually bad for what it implies).

[guywithahat]

Well it's a retort on the 2022 IRA bill, which increased the IRS budget by 80 billion over 10 years, and paved the way to hire 87,000 people. There has been a lot of hiring recently so it's hard to tell one thing from another but this isn't so much of mass layoff as an attempt at returning to normal.

[toomuchtodo]

Please provide evidence for what you considered to be normal to be an effective workforce for the ongoing task at hand (nation state tax collection).

[guywithahat]

We had an exceptional increase in funding, followed by an attempt to curb that increase in funding. The size of the IRS is not just a financial exercise but a moral one, and I believe the prior budget increases as part of the 2022 IRA provides important context to staffing in the IRS.

[nobodyandproud]

I think we should first agree on what “normal” means.

I personally view our IRS head count as being at historical lows by raw headcount; and even lower by population size if we look at the last 40 years (would love data that goes back further).

[groundzeros2015]

The evidence was the baseline before the increase

[toomuchtodo]

The baseline was there was significant tax evasion by high net worth individuals. The staff up was to counter that, staffing down puts us back at reduced enforcement.

Someone has to pay to operate a nation state, you can’t borrow forever to fill the gap and there’s nothing left to cut. Roughly the bottom 60% of Americans do not make enough to have a federal income tax liability. So, we can kick the can on the top 40% paying until the bond vigilantes make the decision for the US.

[groundzeros2015]

> The staff up was to counter that

Stated reasons may or may not be actual.

If you recall these were not just accountants but agents who carry guns etc.

I see this as very similar to the ICE situation. Biden has loyalty and power in IRS and so gave it money to help him police. As the government gets more corrupted I think we’ll find more agencies weaponized like this.

[toomuchtodo]

Can you provide proof of this “loyalty and power” at the IRS to Biden mentioned? Because without proof, it sounds like a “deep state” conspiracy theory without evidence.

[nobodyandproud]

Normal?

The 100k headcount and bill doesn’t cover what we in the US used to enjoy, with a smaller population: - https://taxpolicycenter.org/sites/default/files/2025-04/IRS%...

- https://www.washingtonpost.com/documents/5856e771-dd09-4517-...