IRS Budget Axed: $2.8 Billion Cut Sparks Partisan Clash

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A House Appropriations subcommittee has passed legislation that would allocate $9.5 billion to the IRS for fiscal year 2026, marking a decrease of more than 20% compared to the agency's current $12.3 billion funding. 

The measure, approved by a 9-6 party-line vote in the Financial Services and General Government Subcommittee, would reduce the IRS budget by $2.8 billion, according to the Fiscal Times. 

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Overview of the Funding Bill

• The total proposed funding under the bill is $23.3 billion for fiscal year 2026, a reduction of $410 million from the previous year.
• The bill covers numerous agencies, including the Department of the Treasury, the executive office, judiciary and the Small Business Administration.
• The deepest IRS cut targets enforcement activities, with that budget dropping from $5.4 billion in 2025 to $3 billion in 2026.

Republican Viewpoint:

House Appropriations Committee Chair Tom Cole of Oklahoma argued that the bill meets critical public needs while curbing government waste and demonstrates ongoing progress toward reducing federal spending.

Democratic Response:

Democrats criticized the proposal, warning that such steep cuts make it harder to collect taxes owed and may benefit tax evaders. 

Appropriations Committee Ranking Member Rosa DeLauro emphasized that an underfunded IRS would slow tax return processing, delay benefits like the Child Tax Credit and enable wealthy individuals and large corporations to avoid scrutiny. 

She pointed out that audits typically generate twice as much in revenue as they cost, with audits of the richest households producing $6 for every $1 spent.

Context and Impact

The Republican-backed funding plan continues an effort to reduce the IRS's size and capabilities. 

Although Democrats had provided the IRS with an extra $80 billion over 10 years through the 2022 Inflation Reduction Act to modernize and strengthen the agency, that funding has been gradually reduced. 

If enacted, the House bill would bring IRS funding to its lowest point in over two decades.

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