A recent series of proposals from conservative legislators and supporters of former President Donald Trump seeks to alter the U.S. tax framework in ways that may increase inequality, diminish federal revenue, and place millions of immigrant families at greater risk. Although these proposals are presented as extensions of “existing policy,” their actual consequences could undermine public services and further marginalize vulnerable groups.
At the forefront is the initiative to prolong and broaden the 2017 Tax Cuts and Jobs Act (TCJA), a legislation that has already conferred significant advantages to rich households and corporations. If these tax reductions are made permanent, they could result in a loss of over $3 trillion in federal revenue over the next ten years. Even though the plan’s supporters say it’s financially responsible, they use tricky accounting to hide how much it will really cost. Natasha Sarin, Professor of Law and Finance at Yale University and president of Budget Lab, said that these cuts were designed as temporary relief but without strategic planning, they could jeopardize the nation’s fiscal health, especially as Medicaid and other social safety programs come under increasing strain.
By altering the fiscal baseline, treating temporary tax cuts as if they were permanent, advocates create the illusion that new tax incentives will not increase the deficit. However, the reality is clear: the proposal would lead to a substantial decrease in federal revenues, and when the financial repercussions arise, the same legislators are likely to advocate for cuts to vital safety net programs. This establishes a dangerous cycle: tax reductions for the rich followed by austerity measures that disproportionately affect low-income communities, including seniors, immigrants, and people of color.
IRS Under Attack: Undermining Enforcement to Shield the Wealthy
A significant aspect of this larger initiative involves drastic reductions to the IRS budget, effectively crippling the agency’s capacity to target wealthy tax evaders. Instead of modernizing its antiquated systems or enhancing public access to filing services, the proposed budget cuts would hinder the IRS’s ability to audit intricate, high-value tax returns. Michael Kercher, Deputy Director of the NYU Tax Law Center, expanded on this by noting that cutting IRS funding could worsen tax compliance and reduce the agency’s ability to audit large corporations and the wealthy, which could lead to more tax evasion. He explained that the tax cuts are heavily tilted in favor of the wealthiest Americans, widening the gap between the rich and everyone else.
The IRS already holds most of the information required to process simple tax returns, particularly for W-2 workers. With sufficient technological support and funding, the agency could automate the process for millions of taxpayers, a goal that is working toward through the Direct File pilot program, a free government-run filing system. The Direct File program is immensely popular. According to a nationally representative survey from the Urban Institute, more than 60% of Americans, including Black, Latino, white, and low-income taxpayers support the initiative. Despite this, the program’s future is uncertain as political pressure mounts to dismantle it, in part to protect the profits of private tax preparation companies.
A New Threat: Data Sharing with ICE and Its Impact on Immigrant Communities
Recent actions by the IRS have raised significant concerns among advocates for immigrant rights, extending beyond issues of taxation and audits. The agency’s newly established data-sharing agreement with Immigration and Customs Enforcement (ICE) presents an unprecedented risk to the privacy and safety of immigrant populations. Aravind Boddupalli, a Senior Research Associate at the Urban-Brookings Tax Policy Center, emphasized that the data-sharing agreement would likely reduce federal tax revenue, particularly from immigrant communities. As Natasha has pointed out, undocumented immigrants contribute over $60 billion annually in taxes, and any deterrence in filing taxes due to fear of deportation could exacerbate budgetary pressures.
For many years, undocumented immigrants have used Individual Taxpayer Identification Numbers (ITINs) to file taxes, open bank accounts, and, in some states, obtain identification. These tools have allowed immigrants to contribute to the economy and maintain a level of financial stability despite their status. Now, many fear that using an ITIN or even filing taxes could expose them or their families to ICE enforcement. Aravind noted that this could undermine trust in the tax system and reduce compliance, especially when immigrant communities fear that their personal information could be shared for immigration enforcement.
Boddupalli also raised concerns about the violation of taxpayer confidentiality, which has traditionally been a cornerstone of the IRS’s operations. Section 6103 of the tax code protects taxpayer information from being used for purposes other than tax administration. The data-sharing agreement breaks this long standing protection, potentially using tax data for immigration enforcement. This could erode public trust in the tax system, particularly among immigrant communities who may fear that their information will be used against them. As Boddupalli warned, this undermines the very foundation of a democratic tax system where privacy is essential.
Can AI Replace IRS Agents? Not Without Funding
Some proponents of the IRS cuts argue that Artificial Intelligence (AI) could replace laid-off agents. While AI has potential to improve efficiency, experts caution that the IRS’s infrastructure is decades behind. Richard Prisinzano, Director of Policy Analysis at the Budget Lab, highlighted the challenges posed by outdated IRS technology. He noted, “The computer systems are really quite antiquated,” drawing attention to the need for substantial infrastructure upgrades before AI can play a meaningful role. As Prisinzano explained, even with AI, the IRS would still need skilled personnel to manage and guide the technology.
For AI to play a meaningful role, the IRS would need significant funding to upgrade systems and train models, but the same funding is now under threat. Even if implemented, AI would still require skilled IRS personnel to manage, monitor, and guide the technology. Prisinzano stressed that relying on AI without first modernizing the agency’s infrastructure would not be an effective solution.
A Deeper Ideological Shift: Dismantling the IRS
What’s behind the broader push to defund and weaken the IRS? While some advocates claim to be focused on efficiency or deficit reduction, others have been more explicit. Former President Trump has often expressed nostalgia for the era before federal income tax and has floated creating a new agency, an “external revenue service,” to handle tariffs. His nominee for IRS commissioner once supported legislation that would have abolished the agency completely. These statements, paired with ongoing efforts to cut IRS funding, suggest a deeper ideological goal: to dismantle federal oversight of the rich and to weaken the infrastructure that supports government accountability and progressive taxation.
This is especially dangerous at a time when the tax gap, the difference between what’s owed and what’s collected, is largest among the highest earners. Wealthy individuals with complex finances and hidden income are harder to audit and take more time, skill, and money to investigate. When the IRS loses resources, it’s not regular workers who gain, it’s the ultra-rich.
As we approach a decisive moment in tax policy, the stakes couldn’t be higher. On one hand, we have the potential for a more equitable, transparent, and accessible tax system, one that supports families, upholds the rule of law, and funds essential public services. On the other hand, we face a future where the rich write the rules, evade their obligations, and deepen structural inequality. All while everyday Americans struggle to access basic services and protections.
The coming months will test not only the integrity of our tax system but also our commitment to fairness, inclusion, and democratic accountability. As Natasha warned, extending tax cuts without addressing their long-term cost could undermine the nation’s fiscal stability. The choices Congress makes now will shape economic opportunities for decades to come.