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The IRS and Treasury Department are bracing for a more than 10% drop in tax revenue by the April 15 filing deadline. The projected shortfall, potentially exceeding $500 billion, is attributed to shifting taxpayer behavior and recent federal budget cuts.
Key Factors Behind the Revenue Decline:
- Taxpayer Noncompliance: More individuals and businesses are reportedly not filing taxes or making aggressive deduction claims, betting they won’t be audited.
- IRS Budget Cuts: Spending reductions under Elon Musk’s Department of Government Efficiency have led to job losses at the IRS, weakening enforcement.
- Audit Reductions: The likelihood of tax audits has decreased, emboldening some taxpayers to underreport or avoid payments.
Government Response & Controversy
The Treasury Department dismissed the report as “sensational and baseless,” urging skepticism about anonymous sources. However, experts warn that IRS staff reductions during tax season could materially impact compliance and enforcement, leading to long-term revenue losses.
With tax revenue playing a crucial role in government spending and deficit reduction, policymakers are monitoring the situation closely as the filing deadline approaches.
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