In this world, nothing is certain except death and taxes.In this world nothing can be said to be certain, except death and taxes.Benjamin Franklin, Nov. 13, 1789
This famous adage left by Benjamin Franklin, a founding father of the United States, has been an unwritten rule that has supported American society for more than 200 years.
In the United States, the Internal Revenue Service (IRS) wielded near-absolute power. The anecdote of legendary mafia boss Al Capone dodging murder charges but getting caught by the IRS for tax evasion and ultimately being imprisoned in Alcatraz is well known. The IRS's authority to "chase you to the ends of the earth and collect the last penny" was the bulwark that collateralized the U.S. fiscal system.
This long-held belief is being shaken to its core. On the 10th (local time), Reuters reported that concern is spreading in Washington and on Wall Street that the IRS, once called the "grim reaper," is becoming a toothless paper tiger.
Based on the Thomson Reuters legal databases, Reuters conducted a full analysis of U.S. federal court criminal case records since the 1990s and found that from January to Nov., federal prosecutors indicted only 251 people on charges of violating tax law. That is a steep drop of 27% from the same period last year. It is the lowest level since records began in 1990.
Citing experts, Reuters said, "It is common for administration changes to cause temporary administrative delays, but a decline of this magnitude indicates structural collapse beyond the range of natural adjustment," and "Compared to past annual averages for tax crime indictments, it is fair to say the investigative function is effectively paralyzed."
It is not just indictments that have declined. The people who investigate and review cases have left the field in droves. The IRS works closely with the U.S. Department of Justice (DoJ) Tax Division in the investigation and prosecution of tax-related crimes. When the IRS detects suspected tax violations and investigates, it sends the results to the Justice Department's Tax Division to decide whether to indict. The two are separate agencies, but they cooperate intensively when handling cases requiring expertise, such as complex offshore tax evasion and corporate-scale tax shelters.
Founded in 1934, the Tax Division is effectively being dismantled this year for the first time in 91 years. Elon Musk, the Tesla chief executive officer (CEO), took over the Department of Government Efficiency (DOGE) early this year in the Trump administration and slashed the Tax Division's budget, transferring related functions to other departments. In the process, more than a third of the 80-plus veteran prosecutors in the Tax Division with expertise in tax evasion and other financial crimes resigned rather than transfer and moved to law firms.
According to Reuters' analysis, 420 federal prosecutors had their names on tax-related cases indicted last year. This year, the figure is around 160, down 61%. In one year, about 260 specialized prosecutors vanished from the tax crime field. When they disappear from the tax crime field, even if the IRS investigates, there is a shortage of people to actually bring charges, weakening overall tax crime enforcement.
Valerie Makarevich, a former Los Angeles (LA) federal prosecutor, said in a Reuters interview, "Tax investigations are a niche field requiring a high degree of expertise, and once that expertise collapses, it takes a long time to rebuild." The number of tax specialists at the LA U.S. Attorney's Office fell from 10 last year to 3 now.
In particular, many IRS investigators in the Washington, D.C., area are now chasing undocumented immigrants in bulletproof vests at subway stations and downtown instead of tracking financial crimes. Washington, D.C., is an area where major tax-related crimes, including political lobbying, occur frequently.
However, immediately after taking office, President Trump ordered public safety in Washington, D.C., to be the top priority and directly deployed some agents from the IRS Criminal Investigation (IRS-CI) to front-line enforcement. The initial number assigned to the field was small. After White House deputy chief of staff Stephen Miller, a close Trump ally and known hard-liner, complained that there were "not enough enforcement personnel," the White House forcibly assigned more than 20 additional agents to patrol duties.
There are just over 60 criminal agents in the IRS Washington office. That means more than half of these highly trained specialists with accounting degrees and investigative experience are maintaining public order instead of their core job of tracking tax evasion. As the shabby treatment of the IRS continues, more than 10% of staff in the IRS's overall criminal investigation unit left in the first half of this year. During the same period, overall employees related to tax enforcement at the Justice Department also fell by more than a quarter, Reuters said.
An IRS official who requested anonymity told Reuters, "Ph.D.-level personnel who should be catching accounting fraud and money laundering are monitoring fare evasion in the subway," adding, "It is a national waste of resources and a comedy."
Experts said, "Without oversight, tax evasion can only increase," forecasting that tax revenue losses will grow exponentially over the next few years. The "tax gap," meaning the difference between what the U.S. government should receive in taxes and what is actually collected, was about $696 billion a year as of 2022 (about 1,024 trillion won). It is an astronomical sum on par with the U.S. defense budget (about $800 billion). For this reason, some point out that while President Trump vows to secure revenue by raising the tariff, he is neglecting the leaking bucket of tax evasion at home.
According to the Stanford Institute for Economic Policy Research (SIEPR) and the U.S. Government Accountability Office (GAO), over the past 10 years the IRS audit rate for high earners with annual income of $1 million (about 1.47 billion won) or more has already fallen by more than 70% to 80%. If the Trump administration's staff cuts and aversion to investigations are added to this, the already large tax hole is likely to grow even bigger.
Trust in the fairness that the United States once prided itself on is also collapsing. The core of the tax system, "voluntary honest filing," operates on fear and belief that the government will surely punish tax evaders. Office workers whose taxes are withheld from every paycheck can easily feel deflated when they see big-time tax evaders slip through the legal net. Taxes siphoned off by sophisticated white-collar criminals become a fiscal burden on the state, and this creates a vicious cycle in which the burden is passed on intact to the middle class and working people with transparent wallets.
David Hubert, former deputy minister for tax at the Justice Department, said in a Reuters interview, "Reducing criminal enforcement against noncompliant taxpayers signals indifference to tax evasion," adding, "It insults honest citizens who faithfully pay their taxes."