Former Treasury Secretary Lawrence Summers has voiced serious concern over Donald Trump’s sweeping reductions to the Internal Revenue Service (IRS), warning that the move could cost the U.S. government over $1 trillion in lost revenue over the next decade.
Summers delivered this stark warning during an appearance on Bloomberg Television’s Wall Street Week, calling Trump’s approach a “misguided, wanton attack” that threatens the foundation of America’s tax system.
Trump’s Aggressive Cuts to IRS Operations
As part of his broader strategy to streamline government spending, Trump has implemented widespread cuts across the IRS.
This includes a 75% reduction in the IRS Office of Civil Rights and Compliance, the body responsible for investigating discrimination complaints filed by taxpayers.
There have also been unprecedented leadership changes within the IRS — five acting commissioners have taken the helm since Trump assumed office, including three during the critical tax week alone.
The stated goal of the cuts is to improve the agency’s “efficiency and effectiveness.”
However, critics argue that the changes are hampering enforcement and leading to massive losses in potential tax revenue.
Summers: The Cuts Undermine Voluntary Compliance
Summers, who led the Treasury under President Bill Clinton, did not mince words.
He argued that the Trump administration’s handling of the IRS is “threatening the basis of our tax system, which is based on voluntary compliance.”
“I’d be surprised if we’re not on a path to sacrificing more than $1 trillion of revenue over the next decade,” Summers stated.
Yale Economist: Actual Losses Could Be Double
Natasha Sarin, cofounder of the Budget Lab at Yale University, supported Summers’ concerns and suggested the former Treasury Secretary may actually be underestimating the potential damage.
According to Sarin, the government could forgo as much as $2.4 trillion over the next 10 years if IRS staff and enforcement are dramatically reduced.
Her team at the Budget Lab estimates that in 2025 alone, nearly $700 billion in taxes owed may not be collected due to underreporting or outright noncompliance.
“The IRS collects about 96% of federal revenue,” Sarin explained.
“When you cut back enforcement, it’s like taking traffic cops off the road — people stop following the rules.”
Budget Lab Study: Reduced Audits Mean More Lost Revenue
In a recent study, the Budget Lab projected that a 50% reduction in the IRS workforce — roughly 50,000 jobs — could result in $395 billion in lost tax revenue over the next decade.
However, if the cuts also encourage more widespread noncompliance, the total losses could reach $2.4 trillion.
Sarin emphasized that while the idea of improving government efficiency is a bipartisan goal, the depth of Trump’s cuts to the IRS go beyond reform.
“It’s fundamentally the destruction of the tax system,” she said.
“There’s no way to argue that this is effective in any way.”
Wider Implications for the U.S. Economy
The potential loss in tax revenue could severely affect public services and infrastructure.
Federal taxes fund everything from education and public health to defense spending and transportation.
A weakened IRS, critics argue, risks undermining the government’s ability to finance these essential programs.
No Response From the White House
Representatives for both Lawrence Summers and the White House did not respond to Business Insider’s requests for comment on the situation.
As the debate continues, the long-term effects of these IRS cuts may soon become evident — not only in lost dollars, but in public trust in the nation’s tax system.