December 6, 2024
Department of Government Efficiency (DOGE): Potential Impacts on the Tax Industry
As part of the new administration, President-elect Trump has established Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, with the goals of “dismantling government bureaucracy, slashing excess regulations, cutting wasteful expenditures and restructuring federal agencies” {1}. Musk and Ramaswamy have set ambitious targets, including a potential $2 trillion reduction in federal spending. While these budget cuts will affect various federal departments, this article focuses on their potential impact on the tax industry.
One of DOGE’s most notable proposals is a free mobile app designed to simplify tax filing for Americans. This app could disrupt major tax services like TurboTax and H&R Block by offering a cost-effective alternative to traditional tax preparation methods. Americans spend around 6.5 billion hours each year preparing and filing their taxes, so this app could significantly ease the burden {2}. Initially, the app is expected to handle simpler tax returns, such as those involving W-2 forms and a few 1099 forms. It may evolve to assist with more complex returns over time.
However, DOGE’s efficiency measures have raised concerns among economists and public policy experts. Critics argue that the proposed sweeping cuts could inadvertently impact essential services, including those related to tax administration. Brian Riedl, a senior fellow at the Manhattan Institute, cautioned that while the goal of reducing waste is commendable, the approach might lead to unintended consequences, such as reduced funding for critical tax-related programs {3}. The American Federation of Government Employees (AFGE) also warned that the proposed cuts could affect the quality and availability of services that millions of Americans rely on.
There are also concerns for the IRS, which recently received a significant budget increase of $80 billion in 2022. This funding addressed the outdated technologies and the declining services of the past few decades. The potential budget cuts could lead to reduced enforcement, decreased customer service, and a less experienced workforce. It could also stall modernization efforts, making it harder for the IRS to handle increasingly complex tax filings and to implement new initiatives like DOGE’s proposed mobile app.
The Department of Government Efficiency represents a bold attempt to reshape the federal government. Its impact on the tax industry could be profound, offering both opportunities and challenges. As the initiative unfolds, stakeholders in the tax sector will need to stay informed and adaptable to navigate the changes ahead.
{1} https://www.bbc.com/news/articles/c93qwn8p0l0o
{3} https://www.newsweek.com/trump-musk-government-efficiency-doge-cuts-government-services-1986080