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How DOGE’s Cuts to the IRS Threaten to Cost More Than DOGE Will Ever Save

4 months 1 week ago

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Dave Nershi was finalizing a report he’d worked on for months when an ominous email appeared in his inbox.

Nershi had worked as a general engineer for the Internal Revenue Service for about nine months. He was one of hundreds of specialists inside the IRS who used their technical expertise — Nershi’s background is in chemical and nuclear engineering — to audit byzantine tax returns filed by large corporations and wealthy individuals. Until recently, the IRS had a shortage of these experts, and many complex tax returns went unscrutinized. With the help of people like Nershi, the IRS could recoup millions and sometimes more than a billion dollars on a single tax return.

But on Feb. 20, three months shy of finishing his probationary period and becoming a full-time employee, the IRS fired him. As a Navy veteran, Nershi loved working in public service and had hoped he might be spared from any mass firings. The unsigned email said he’d been fired for performance, even though he had received high marks from his manager.

As for the report he was finalizing, it would have probably recouped many times more than the low-six-figure salary he earned. The report would now go unfinished.

Nershi agreed that the federal government could be more lean and efficient, but he was befuddled by the decision to fire scores of highly skilled IRS specialists like him who, even by the logic of Elon Musk’s Department of Government Efficiency initiative, were an asset to the government. “By firing us, you’re going to cut down on how much revenue the country brings in,” Nershi said in an interview. “This was not about saving money.”

Since taking office, President Donald Trump and his billionaire top adviser Musk have launched an all-out blitz to cut costs and shrink the federal government. Trump, Musk and other administration leaders not only say the U.S. government is bloated and inefficient, but they also see it as a bastion of political opposition, calling it the “deep state.”

The strategy used by the Trump administration to reduce the size of government has been indiscriminate and far-reaching, meant to oust civil servants as fast as possible in as many agencies as possible while demoralizing the workers that remain on the job. As Russell Vought, director of the Trump White House’s Office of Management and Budget and an architect of Project 2025, put it in a speech first reported by ProPublica and Documented: “We want the bureaucrats to be traumatically affected. When they wake up in the morning, we want them to not want to go to work because they are increasingly viewed as the villains.”

One tactic used by the administration is to target probationary workers who are easier to fire because they have fewer civil service protections. Probationary, in this context, means only that the employees are new to their roles, not that they’re newbies or underperformers. ProPublica found that the latest IRS firings swept up highly skilled and experienced probationary workers who had recently joined the government or had moved to a new position from a different agency.

In late February, the Trump administration began firing more than 6,000 IRS employees. The agency has been hit especially hard, current and former employees said, because it spent 2023 preparing to hire thousands of new enforcement and customer service personnel and had only started hiring and training those workers at any scale in 2024, meaning many of those new employees were still in their probationary period. Nershi was hired as part of this wave, in the spring of last year. The boost came after Congress had underfunded the agency for much of the past decade, which led to chronic staffing shortages, dismal customer service and plummeting audit rates, especially for taxpayers who earned $500,000 or more a year.

The administration doesn’t appear to want to stop there. It is drafting plans to cut its entire workforce in half, according to reports.

Unlike with other federal agencies, cutting the IRS means the government collects less money and finds fewer tax abuses. Economic studies have shown that for every dollar spent by the IRS, the agency returns between $5 and $12, depending on how much income the taxpayer declared. A 2024 report by the nonpartisan Government Accountability Office found that the IRS found savings of $13,000 for every additional hour spent auditing the tax returns of very wealthy taxpayers — a return on investment that “would leave Wall Street hedge fund managers drooling,” in the words of the Institute on Taxation and Economic Policy.

John Koskinen, who led the IRS from 2013 to 2017, said in an interview that the widespread cuts to the IRS make no sense if Trump and Musk genuinely care about fiscal responsibility and rooting out waste, fraud and abuse. “What I’ve never understood is if you’re interested in the deficit and curbing it, why would you cut back on the revenue side?” Koskinen said.

Neither the IRS nor the White House responded to requests for comment. Last month, Musk asked his followers on X, the platform he owns, whether they would “like @DOGE to audit the IRS,” referring to the U.S. DOGE Service team of lawyers and engineers led by him. DOGE employees have sought to gain access to IRS taxpayer data in an attempt to “shine a light on the fraud,” according to a White House spokesman.

For this story, ProPublica interviewed more than a dozen current and former IRS employees. Most of those people worked in the agency’s Large Business and International (LB&I) division, which audits companies with more than $10 million in assets and high-income individuals. Within the IRS, the LB&I division has the highest return on investment, and the widespread cuts there put in stark relief the human and financial cost of the Trump administration’s approach to slashing government functions in the name of saving money and combating waste and fraud.

According to current and former LB&I employees, the taxpayers they audited included pharmaceutical companies, oil and gas companies, construction firms and major technology corporations, as well as more obscure private corporations and high-net-worth individuals. None of the IRS employees who spoke to ProPublica would disclose specific taxpayer information, citing privacy laws.

With the recent influx in funding, employees said, the leadership of LB&I had pushed to hire not only more revenue agents and appraisers but also specialized employees such as petroleum engineers, computer scientists and experts in corporate partnerships. These employees, usually known internally as general engineers, consulted on complicated tax returns and helped determine whether taxpayers properly claimed certain credits or other tax breaks.

This work happened in cases where major companies claimed a hefty research tax credit, which is a legitimate avenue for seeking tax relief but can also be improperly used. Highly skilled appraisers have also recouped huge savings in cases involving notorious tax schemes, such as what’s known as a syndicated conservation easement — a break abused so often that both congressional Democrats and Republicans have criticized it, while the IRS has included it on its list of the “Dirty Dozen” tax scams.

“These are cases where revenue agents don't have the technical expertise,” said one IRS engineer who is still employed at the agency and who, like other IRS employees, wasn’t authorized to speak to the media. “That’s what we do. We are working on things where expertise is absolutely necessary.”

Current and former IRS employees told ProPublica that the agency had expended a huge amount of resources to recruit and train new specialists in recent years. Vanessa Rollins, an engineer in the IRS’ Chicago office who was recently fired, said probationary employees in LB&I outnumbered full-time staffers in her office. Much of her team’s work centered on training and mentorship for the waves of new employees — most of whom were recently fired. “The entire office had been oriented around bringing us in and getting us trained,” Rollins said.

These specialists said they earned higher salaries compared with many other IRS employees. But the money these specialists recouped as a result of their work was orders of magnitude greater than what they cost. The current engineer told ProPublica that they estimated their team of less than 10 people had brought in $5 billion in adjusted tax returns over the past four years. (By contrast, a Wall Street Journal analysis published on Feb. 22 found that DOGE had found savings of $2.6 billion over the next year, far less than the $55 billion claimed by DOGE itself.)

A former LB&I revenue agent added that their work didn’t always lead to the IRS recouping money from a taxpayer; sometimes, they audited a return only to find that the taxpayer was owed more money than they had expected.

“The IRS’ mission is to treat taxpayers fairly so they pay the tax they legally owe, including making sure they’re not paying any more than legally required,” the former revenue agent said.

Notwithstanding its return on investment and the sense of duty espoused by its employees, LB&I was hit especially hard by the most recent wave of firings, employees said. According to the current IRS engineer, the Trump administration appears to have eliminated the jobs of about 120 LB&I engineers out of a total of roughly 260. The person said they had heard more terminations were expected soon. The acting IRS chief and a longtime agency leader, Doug O’Donnell, announced his retirement amid the firings.

Several LB&I employees told ProPublica that the mass layoffs had been ordered from a very high level and that several layers of managers had no idea they were coming or what to expect. The cuts, employees said, did not appear to distinguish between employees with certain specialties or performance levels, but instead focused solely on whether they were on probationary status. “It didn't matter the skill set. If they were under a year, they got cut,” another current LB&I employee told ProPublica.

The current and former IRS employees said the firings and the administration’s deferred resignation offer led to situations that have wiped out decades of experience and institutional knowledge that can’t easily be replaced. Jack McCumber was an LB&I senior appraiser in Seattle who got fired about six weeks before the end of his probationary status. He said not only did he lose his job, but the veteran appraiser who was his mentor took early retirement. McCumber and his mentor often worked on syndicated conservative easement cases that could recoup tens and even hundreds of millions of dollars. “They’re pushing out the experienced people, and they’re pushing out people like me,” McCumber said. “It’s a double whammy.”

The result, employees and experts said, will mean corporations and wealthy individuals face far less scrutiny when they file their tax returns, leading to more risk-taking and less money flowing into the U.S. treasury.

“Large businesses and higher-wealth individuals are where you have the most sophisticated taxpayers and the most sophisticated tax preparers and lawyers who are attuned to pushing the envelope as much as they can,” said Koskinen, the former IRS commissioner. “When those audits stop because there isn't anybody to do them, people will say, ‘Hey, I did that last year, I'll do it again this year.’”

“When you hamstring the IRS,” Koskinen added. “it’s just a tax cut for tax cheats.”

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A New Missouri Bill Would Let Residents Donate to Anti-Abortion Centers Instead of Paying Any Taxes

4 months 1 week ago

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

In an unprecedented move to funnel more public tax dollars toward groups that oppose abortion, Republican lawmakers in Missouri are advancing a plan to allow residents to donate to pregnancy resource centers instead of paying any state income taxes.

The proposal would establish a 100% tax credit, up from 70%, and a $50,000 annual cap per taxpayer. The result: Nearly all Missouri households — except those with the highest incomes — could fully satisfy their state tax bill by redirecting their payment from the state to pregnancy centers.

The move comes four months after Missouri voters reversed one of the nation’s strictest abortion bans, and just as clinics have begun performing the procedure again after overcoming Republican obstacles.

Supporters of the bill, which last month cleared a key legislative hurdle in the state House, say it gives taxpayers more control over where their tax dollars go and allows them to support organizations that help pregnant women and provide alternatives to abortion. Alissa Gross, CEO of Resource Health Services, which runs four pregnancy resource centers in the Kansas City area, told the committee in written testimony that tax credits have led to a surge in donations to her organization and that a 100% tax credit could bring in even more.

“Our ability to impact more men and women for life as well as build healthy families has been substantial,” she said.

Critics argue the state’s support for pregnancy resource centers, also known as crisis pregnancy centers, diverts tax revenue away from essential services such as health care and public education and becomes a funding stream for anti-abortion advocacy. They say many centers do little to actually help women; instead, they say they merely discourage women from getting abortions.

“A 70 percent tax credit with no cap was excessive. A 100 percent tax credit is absurd,” Katie Baylie, a lawyer and reproductive rights advocate based in the Kansas City area, wrote in testimony submitted to the committee. “It is an insult to Missourians that our lawmakers are spending time even considering this bill.”

Experts in tax policy and philanthropy said a dollar-for-dollar tax credit — for any purpose — is rare and could be much costlier for the state than intended, especially if pregnancy centers actively promote it.

There is a big psychological difference for donors between a 100% tax credit and a 70% credit, the experts said. At 70%, donors still have to pay some taxes, but at 100%, there is no reason to make a donation less than their tax liability.

“I could imagine a possibility where there’s a big publicity campaign by these centers, or a viral campaign, and massive numbers of conservative Missourians decide to effectively defund state government in favor of these pregnancy resource centers,” said David Gamage, a professor of tax law and policy at the University of Missouri law school.

However, expansion of tax credits clashes with another Republican push to eliminate Missouri’s income tax altogether. Two proposals to replace it with a higher sales tax recently advanced in the state Senate, although it was unclear whether they could pass. If Missouri were to abolish state income taxes, tax credits would become meaningless.

The bill represents one more expansion of a measure Missouri lawmakers have been growing for several years. Until 2021, Missouri taxpayers who donated to pregnancy resource centers were able to claim a 50% tax credit for their donations, meaning for every $1,000 in donations, a taxpayer’s bill dropped by $500. That’s when an expansion approved by the legislature in 2019 took effect and raised the rate to 70%. That shifted more of the cost of those contributions to the state, since tax credits work by directly reducing the amount of money a taxpayer owes to the state. Unlike deductions, which lower taxable income, tax credits are a dollar-for-dollar reduction in tax liability. When these credits are redeemed, they prevent the state from collecting that revenue, effectively reducing the total income available for public services.

The legislature also removed a $3.5 million-per-year cap on the program and removed its expiration date.

At the time, the change drew little attention because it was tucked into the same legislation that created Missouri’s trigger law to ban abortion if Roe v. Wade were overturned — a move that dominated headlines. And there were few warnings about how much it could cost.

The bill’s official cost estimate, prepared by nonpartisan legislative oversight staff, projected only a modest increase in taxpayer expense. Raising the tax credit to 70% was expected to increase annual tax credits from $3.5 million to $4.9 million. That estimate assumed donations would remain steady.

But they didn’t. The program has grown significantly, with $11.8 million in tax credits authorized in the past year alone. Still, it remains a small fraction of Missouri’s overall budget; Gov. Mike Kehoe has proposed a $54 billion spending plan for next year.

Once again, legislative research is downplaying the potential impact on Missouri’s budget. The fiscal note for the bill accounts only for the jump from a 70% to a 100% tax credit, without considering the likely surge in donations that such an incentive would trigger — even though increasing giving is the entire point of the policy.

The note says that it was “unclear” whether the enhanced tax credit would encourage more people to contribute and claim the credit, which would lead to more foregone tax revenue for the state.

The legislative research staffer who authored the impact statement declined to comment, and the bill’s House sponsor, Rep. Christopher Warwick, did not respond to questions from ProPublica.

Warwick, a Republican from Bolivar, in southwest Missouri, told the tax reform committee that his proposal empowers taxpayers to support important work without the state “trying to verify what programs work.” He said, too, that he would oppose requirements for pregnancy resource centers to report how they spend the money, saying he wanted to “limit the bureaucracy.”

Warwick’s bill would also increase the tax credit for donations to maternity homes from 70% to 100% and for diaper banks from 50% to 100%. The state has not yet studied the impact of those changes.

A matching bill has been introduced in the Senate but has not yet advanced.

Rep. Steve Butz, a Democrat from St. Louis, argued the tax credit would effectively shift charitable giving from individuals to the state.

“This will be the fourth bill I’ve heard that will reduce revenue, which I guess is clearly your goal here — to reduce the revenue to the state,” Butz told Warwick during a legislative hearing on the bill. He argued that if donors receive a full tax credit for their contributions, they aren’t really giving their own money — rather, the state is effectively making the donation for them. “So I don’t know that I’d consider that much charitable giving.”

In an interview, Butz said he considers himself pro-life and has donated to pregnancy resource centers, receiving the 70% tax credit. However, he said he does not believe the program should take priority over others that receive less or no tax incentives for giving.

Missouri’s approach to crisis pregnancy centers reflects a growing divide between red and blue states. While Republican-led states such as Florida, Texas and Tennessee have ramped up funding for pregnancy resource centers, states led by Democrats, including Massachusetts and California, have warned residents the centers mislead patients by posing as medical clinics while steering them away from abortion.

Missouri is among the national leaders in per capita spending on pregnancy resource centers even before tax credits are factored in, according to data from states that fund them. Kehoe has proposed increasing direct state funding by almost 50% to more than $12 million in the fiscal year that starts July 1.

In a statement, Gabby Picard, communications director in Kehoe’s office, said the governor “is committed to supporting services that help women choose to carry their unborn child to term, which is why his budget recommends increased funding” for abortion alternatives, including pregnancy resource centers.

Missouri was the first state to use tax credits to fund pregnancy centers, becoming a model for other states looking to support the anti-abortion movement. One public health expert who has tracked the impact of pregnancy centers said Missouri has been a leader and innovator in this effort. “What Missouri is proposing really makes them an outlier at the top of the game,” said Andrea Swartzendruber, an associate professor of epidemiology and biostatistics at the University of Georgia.

Warwick’s initiative follows sweeping changes to Missouri’s abortion laws.

In November, voters approved a constitutional amendment guaranteeing the right to abortion and other reproductive health decisions, effectively nullifying a near-total ban that had been in place since 2022, when the U.S. Supreme Court overturned Roe v. Wade.

The first abortion performed under the new amendment took place in Kansas City on Feb. 15, after a judge struck down restrictive licensing rules that had prevented providers like Planned Parenthood from resuming services in the state.

In response, Republican lawmakers have introduced a wave of bills aimed at limiting the amendment’s impact. Among the measures is another proposed constitutional amendment that would restrict abortion and ban gender-affirming care for minors — an effort to combine something that voters support with something they don’t in the hopes it’ll turn off abortion-rights supporters.

Some abortion-rights advocates in the legislature see the expanded tax credit as part of a broader push by anti-abortion lawmakers stung by the repeal of the abortion ban. After the amendment passed, those legislators “needed some wins,” said Rep. Kemp Strickler, a Democrat from the Kansas City suburbs.

“But even if the amendment had lost,” Strickler said, “they probably would have been coming forward with these kinds of things.”

by Jeremy Kohler

Herrmann, John “Jack”

4 months 1 week ago
Herrmann, John "Jack", on Fri., Feb. 28, 2025. Visitation Thurs., March 6, 9 am at St. Peter Church, Kirkwood, followed by funeral Mass at 11 am. Burial, St. Peter Cemetery. See boppchapel.com for full obituary.