Donald Moynihan writes:

The Internal Revenue Service may be America’s least-loved government agency, but it is one of the most important. Without the taxes the IRS collects, the United States would essentially have no funds for key services and no creditworthiness, and the nation would rapidly grind to a halt. Ensuring that everyone pays their fair share is also a key component of the social contract: If the wealthiest can skip their obligations, that weakens any shared commitment to the common good. No one loves paying taxes, but the IRS does give taxpayers good value: For every dollar spent by the agency, it generates at least $5, and possibly as much as $12; in addition, every hour devoted to auditing the very wealthy produces a return of $13,000.

This time last year, a modernization effort was making real progress in improving the IRS’s service quality. Today, what can only be described as a demolition effort is deliberately dismantling this vital state capacity.

President Donald Trump and Elon Musk’s DOGE intend to cut the number of IRS employees by half. Already, thousands were fired during tax season. Cuts have fallen especially hard on tax-audit functions. The IRS was finally assembling teams with the skills to pursue complex tax scams, those more likely to be undertaken by the very wealthy. These teams, and the accompanying audits, are now falling apart.

As a result, core tasks are being neglected. Less money will be collected, which will increase government spending deficits and put pressure on appropriations for crucial programs. The very rich, in particular, will benefit. Not only are they likely to be handed an extension of the tax cuts from Trump’s first term; they are also getting a tax-reporting environment where the IRS will simply be unable to keep up. “All of a sudden, these cases are going to be closed and we’re going to look like idiots,” one senior revenue agent told an investigative-journalism nonprofit. “There is no one left to work them.” This Tax Day, the IRS has never been in worse shape.

The early firings focused on probationary employees, but many of those relatively new employees did have substantial experience, because the IRS had been focused on recruiting specialists in accounting and tax law who can keep up with their private-sector counterparts. The unit that examined billionaire tax evasion has already lost 38 percent of its staff. [Continue reading…]

The New York Times reports:

President Trump has replaced the acting commissioner of the Internal Revenue Service after his appointment just days earlier set off a power struggle between Treasury Secretary Scott Bessent and the billionaire Elon Musk, five people with knowledge of the change said Friday.

Mr. Bessent’s deputy, Michael Faulkender, will be the new acting leader, replacing Gary Shapley, the Treasury Department confirmed on Friday. Mr. Faulkender will be the third acting leader of the agency this week.

Mr. Bessent had complained to Mr. Trump this week that Mr. Musk had done an end run around him to get Mr. Shapley installed as the interim head of the I.R.S., even though the tax collection agency reports to Mr. Bessent, the people familiar with the situation said. They spoke on the condition of anonymity to discuss private conversations.

The clash was the latest instance of Mr. Musk’s influence in the Trump administration that has alarmed top officials. It was also the latest upheaval at the tax agency, with much of its staff pushed out or quitting. Mr. Trump earlier this week called for the I.R.S. to revoke Harvard University’s tax-exempt status after the school refused to impose sweeping changes demanded by the administration.

An I.R.S. spokeswoman declined to comment on the leadership changes.

Mr. Shapley, a longtime I.R.S. agent, gained fame among conservatives after he claimed that the Justice Department had slow-walked its investigation into Hunter Biden’s taxes.

Mr. Musk’s Department of Government Efficiency pushed Mr. Shapley’s appointment through White House channels, but Mr. Bessent was not consulted or asked for his blessing, according to those with knowledge of the dynamic. Mr. Bessent then got Mr. Trump’s approval to unwind the decision within days, they said. Mr. Shapley had been working from the I.R.S. commissioner’s office as late as Friday morning.

“Trust must be brought back to the I.R.S., and I am fully confident that Deputy Secretary Michael Faulkender is the right man for the moment,” Mr. Bessent said in a statement Friday afternoon. The position of I.R.S. commissioner will be filled in an acting capacity while former Representative Billy Long awaits Senate approval for the role.

In his statement, Mr. Bessent praised Mr. Shapley for his “passion and thoughtfulness” and said that he remains an important adviser. Mr. Shapley and another I.R.S. critic of the Hunter Biden tax investigation, Joseph Ziegler, will be assigned to senior roles at the Treasury Department or the I.R.S.

Karoline Leavitt, the White House press secretary, did not address the details of the dispute, but said “it’s no secret President Trump has put together a team of people who are incredibly passionate about the issues impacting our country.”

“Disagreements are a normal part of any healthy policy process,” Ms. Leavitt said. “And ultimately everyone knows they serve at the pleasure of President Trump.”

Mr. Trump had picked Mr. Shapley to run the I.R.S. on Tuesday after the previous interim head, Melanie Krause, chose to resign. Ms. Krause quit after the Treasury Department agreed to use I.R.S. data to help Immigration and Customs Enforcement deport undocumented immigrants.

Treasury officials had hoped to persuade Ms. Krause, who had aligned with the administration on other issues, to stay in her job until at least May 15. While she had signed up for the administration’s deferred resignation program, Ms. Krause remained in the role until Mr. Musk forced the change on Tuesday and helped install Mr. Shapley.

The feud between Mr. Musk and Mr. Bessent went public late Thursday night, when Mr. Musk amplified a social media post from the far-right researcher Laura Loomer accusing Mr. Bessent of colluding with a “Trump hater.”

“Troubling,” Mr. Musk wrote about Mr. Bessent’s meeting John Hope Bryant, the chief executive of the nonprofit Operation HOPE. Mr. Bryant is working on a financial literacy effort with Treasury officials.

Ms. Loomer had called that meeting a “vetting failure.”

Ms. Loomer helped push out several officials from the National Security Council earlier this month, after first attacking some of them online and then meeting with Mr. Trump in the Oval Office and presenting him with a list of those she deemed disloyal.

Mr. Trump’s decision to side with Mr. Bessent in the dispute over the I.R.S. comes as Mr. Musk has been a less visible presence around Mr. Trump in recent weeks, and officials across the administration say he has been less of a headache than they had found him to be in the first several weeks of the second Trump presidency.

Mr. Musk’s moves to secure advisers in high-level posts across key agencies as part of his government-shrinking DOGE, and his methods to try to wrangle federal workers, have roiled some cabinet secretaries, even those who favor his overall goal of reform.

Mr. Trump still speaks warmly of Mr. Musk, and Mr. Trump’s advisers have taken note that the billionaire has said he wants to donate another $100 million through political entities controlled by the president’s team. But the president has also privately acknowledged that Mr. Musk has made missteps. Mr. Trump has said that he believes Mr. Musk will return to his private companies before too long. As a special government employee, Mr. Musk is allotted 130 days of time on the job. But if he works part time, he may be able to extend his time in government.

Mr. Musk, who has claimed to hold the record for paying the largest individual tax bill, has deployed several members of DOGE to the I.R.S. His team has pushed for steep staff cuts at the tax agency and canceled scores of contracts with outside technology vendors.

One of the DOGE members at I.R.S., Gavin Kliger, was recently pushed out of the agency, according to three people familiar with the situation. [Continue reading…]