The standard progressive position on the Internal Revenue Service is straightforward: the agency is starved of funding, can’t enforce against wealthy tax cheats, and needs more agents and bigger budgets to close the tax gap. The 2022 Inflation Reduction Act delivered roughly $80 billion in additional IRS funding largely on this rationale. The premise is partly true — the IRS has been hollowed out — but the conclusion that more funding will fix the dysfunction misreads what actually plagues the agency. The IRS is structurally bloated in some areas, threadbare in others, and its problems aren’t primarily about money.
This isn’t a defense of tax avoidance or a brief against tax enforcement. It’s an honest look at why pouring funding into a broken system rarely produces what reformers expect.
What the IRS actually spends money on
The IRS has roughly 80,000 to 90,000 employees post-IRA hiring, and a budget approaching $14 billion annually. A majority of that workforce is dedicated to taxpayer services, returns processing, and routine compliance — not to the high-end audits of wealthy taxpayers and corporations that tax-gap rhetoric focuses on. The agency runs on legacy IT systems that include code written in the 1960s, which periodic modernization budgets have failed to replace despite billions allocated. The result is a workforce simultaneously over-staffed in low-value processing roles and dramatically under-skilled in the forensic accounting needed to take on serious wealthy tax avoidance. Adding 87,000 employees, as the IRA contemplates, mostly adds capacity in the same categories where automation could replace existing staff, not in the elite audit ranks where shortage is actually binding.
Why audits skew toward the working class
A widely cited Stanford and Treasury study found that EITC recipients — predominantly low-income workers — are audited at rates close to those of the wealthiest filers, despite the wealthy being responsible for the vast majority of the tax gap by dollar value. This isn’t because the IRS is anti-poor; it’s because EITC audits are cheap and automated, while wealth audits require deeply skilled examiners willing to spend years on a single complex partnership return. The IRS has hemorrhaged senior auditors to private practice, where they’re paid two to three times federal salaries to defend the same returns the IRS wants to challenge. More general funding doesn’t solve the senior-talent gap; targeted compensation reform might, and that’s not what the IRA delivered.
What actual reform would look like
The honest reform agenda is unsexy. Genuinely modernize the IT systems, which would let a smaller workforce do more accurate work. Restructure compensation to retain and recruit the small number of expert examiners who can pursue high-end avoidance. Simplify the tax code itself — the U.S. has one of the most complex codes in the developed world, and complexity is what creates the gaps wealthy filers exploit. Reduce duplicative paper-shuffling work that automation can handle. None of this fits cleanly into either party’s narrative, which is part of why it doesn’t happen.
Bottom line
The IRS doesn’t need to be defended or attacked as a bloc. It needs the kind of granular reform neither side is offering. Bigger budgets without structural change reproduce existing dysfunction at a larger scale. That’s not progress — it’s just a more expensive version of the same problem.
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