On July 1, 2025, the U.S. Senate narrowly approved the sweeping “One Big Beautiful Bill” (OBBB), also dubbed the “Big Beautiful Bill,” by a 51‑50 vote, with Vice President J.D. Vance casting the tiebreaker. The Senate’s version includes:

Permanent extensions of key 2017 Tax Cuts and Jobs Act (TCJA) provisions—lower rates, larger standard deduction, higher child tax credits.

New tax breaks: deductions on tips and overtime pay, expanded SALT cap, enhanced business incentives like 100% bonus depreciation.

Spending shifts: hefty defense and border funding, balanced partly by deeper cuts to Medicaid, SNAP, clean energy incentives, and healthcare.

Fiscal impact: CBO estimates a $3.3 trillion deficit increase over 10 years, versus the administration’s projection of $2–3 trillion in deficit reduction via economic growth

Now, the bill heads to the House under a tight July 4 deadline for final approval before reaching the president’s desk.

Impact on IRS Employees with a Major Staffing Reductions

The bill’s budget offsets rely partly on deep staffing cuts at the IRS, eliminating about 25 % of its workforce—around 20,000 employees—and even more in key divisions like Large Business and International audits.

Already, approximately 6,000–7,000 probationary staff were terminated mid-tax-season, alongside reassignment of some IRS personnel to the Department of Homeland Security.

Consequences for Services & Compliance

The Government Accountability Office has warned that the planned IRS staffing cuts could have serious consequences for the 2026 tax-filing season and beyond. With thousands of employees being laid off, taxpayers may face significant processing delays for returns and refunds, especially for more complicated filings that require additional review. Reduced staffing will likely mean longer waiting times for assistance, as fewer customer service agents struggle to handle millions of calls and inquiries during peak filing months. This could create growing backlogs, errors, and frustration for individuals and businesses alike.

The cuts will also sharply weaken the IRS’s ability to detect and prevent tax fraud. With fewer auditors and specialists, the agency will struggle to keep pace with complex tax avoidance schemes, particularly among high-income households and large corporations that have the means to exploit loopholes and gray areas in the tax code. As a result, billions in potential revenue could be lost each year, undercutting the very tax base that these new cuts rely on.

Democratic lawmakers, including Senator Elizabeth Warren, argue that gutting IRS enforcement capacity directly undermines any promise of fiscal responsibility. They point out that every dollar invested in IRS audits and enforcement typically returns multiple dollars in recovered taxes and penalties, helping to keep the tax system fair and the federal deficit in check. Critics warn that reducing this oversight will make it easier for wealthy taxpayers and big businesses to underpay what they owe, shifting more of the burden onto working families while worsening the deficit the tax bill is projected to grow. In the long run, weakened enforcement could erode trust in the system, encouraging more taxpayers to test the limits of non-compliance, knowing the risk of being audited has fallen dramatically.

Employee Morale & Institutional Trust

The recent layoffs, which have come in the middle of the busy tax-filing season, have dealt a serious blow to employee morale across the IRS. Many remaining staff members are now facing growing anxiety about their own job security, with some bracing for forced transfers, heavier workloads, and the real risk of burnout as they try to cover the gaps left by thousands of departed colleagues. The uncertainty has also raised questions about whether the agency can maintain its mission of fairly and effectively administering the nation’s tax laws. These concerns have only deepened with the appointment of former IRS Commissioner Billy Long, who has previously argued for abolishing the IRS altogether. His return to lead the agency has alarmed many employees and watchdogs who fear that trust in the institution—and its ability to function as an independent, nonpartisan tax authority—could erode even further under leadership that may not fully support its core purpose.

What This Means for Taxpayers

For taxpayers, the passage of this bill could mean significant headaches ahead. Many can expect delayed returns and refunds, especially when filing more complex returns, as processing times slow down due to reduced staffing. Customer support is also likely to deteriorate, with fewer agents and overburdened automated systems struggling to handle inquiries. With fewer audits and less oversight, there is a real risk that tax compliance will weaken, encouraging more non-compliance and ultimately shrinking government revenue. Over time, as Democrats have warned, this undermined enforcement could reduce federal receipts even further, adding to the deficit the tax cuts were meant to offset.

Summary

The Senate’s passage of the Trump tax bill marks a dramatic shift towards making the 2017 tax cuts permanent and rewarding workers and businesses with new deductions and incentives. However, the fiscal price tag has led to drastic IRS cuts—wiping out a quarter of its workforce. This threatens the IRS’s ability to serve taxpayers in 2026 and beyond, debilitate its core enforcement functions, and may ultimately erode the very revenue streams the legislation depends on. The House now faces a pivotal vote to determine whether these provisions—and their hidden fallout—move forward.

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