Treasury Secretary Scott Bessent defended the Trump administration’s proposed $1.4 billion budget cut for the IRS for fiscal year 2027, describing it as “a modest decrease” that “targets inefficiency and duplicative spending.” Bessent told a Senate Appropriations subcommittee on April 22 that the IRS can “maintain current services” and “implement new initiatives” under the proposed budget — but multiple Democrats disagreed.
Enforcement Funding Debated
The proposed budget sparked a debate over its impact on tax enforcement. The Trump administration requested $4.1 billion for IRS enforcement for fiscal year 2027, an 18% reduction from fiscal year 2026. The cuts would come as additional funding for the IRS via the Inflation Reduction Act runs dry, after multiple rescissions.
Ranking Member Jack Reed (D-RI) challenged the reduction, citing the IRS’ own justification that every dollar spent on enforcement yields an $11 return. Senator Chris Van Hollen (D-MD) echoed this, arguing the cuts provide a “windfall to very wealthy people” who don’t pay their taxes.
“Part of the purpose for providing the IRS with some additional funds was specifically to go after very high-end individuals,” Van Hollen stressed. But with the proposed cuts, and without additional IRA funds for enforcement, he is concerned about the agency’s ability to ensure tax law compliance. “According to CBO, we’re actually going to see deficits go up,” said Van Hollen.
Bessent countered that “the data does not support that,” noting that enforcement recoveries were up 12% in the last year to nearly $41 billion, despite the budget cuts. He attributed the success to technology that allows the IRS to prompt taxpayers to fix likely errors before an audit is initiated, rather than employing a larger number of enforcement officers. He dismissed the hiring of officers during the previous administration as a “scoring gimmick,” arguing that new officers lack the expertise to be effective.
Focus on Technology
Throughout his testimony, Bessent highlighted technology as the key to modernizing the IRS and improving service — even amid funding cuts.
He explained that the administration is finding efficiencies by reducing overspending on data processing and outside contractors — adding that “about $2 billion of the reduction is in that area.” Bessent also cited the increase in taxpayer online inquiries this year as a cost-saving measure.
He noted that the agency is becoming a “digital-first agency,” with 98% of returns now filed online. This has reduced paper processing costs from $45 million to just $20 million, Bessent said. He also pointed to new metrics that “better align[] performance measurement with how people interact with the IRS today.”
Senator Jon Husted (R-OH) supported the technology-focused approach, drawing on his own experience using technology to reduce staff and improve customer service in Ohio’s state government. “I know firsthand how you can use technology to reduce head count and improve outcomes, and government needs to do more of this,” said Husted.
Bessent added that getting the agency’s 12 different data systems to communicate with each other will result in “better collections, better privacy … and a much better taxpayer experience.”
However, Senator Chris Coons (D-DE) questioned Bessent on how shutting down Direct File, the agency’s free tax filing program, aligns with the administration’s goal of making the IRS “easier to access” and “more efficient.” Coons noted that over 300,000 taxpayers used the free service, with 90% rating it favorably. The program saved the average participant $160 compared to paid tax preparation services, he added.
Bessent defended Direct File’s cancellation, arguing that the program was not free, rather it cost the government $138 per filer. He also pointed to the low completion rate, with more than 60% of people who started an application failing to finish it. According to Bessent, the public-private partnership, Free File, is more effective — and it served over 3 million people.
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