Edward McCaffery, a well-recognized tax scholar at the University of Southern California, wrote a paper in which he compared government to a living organism “motivated by self-interest and instincts for self-preservation and enlargement.”
What he described as the “Leviathan Hypothesis” suggests that governments, “or any bureaucracy generally, continually expand.” Why? Because once a government program is in place, “it is hard to take away;” voters will perceive benefit and entitlement and it becomes politically risky for lawmakers to cut back.
At some point, however, whether because of higher taxes, “the size of government, or the magnitude of the deficit,” voters will overcome the allure of government programs and call for reform. Or as McCaffery puts it, “Leviathan has a natural tendency to pop his own bubbles.”
When McCaffery wrote his article in 1994, it would have been difficult for him to envision a “Department of Government Efficiency” (DOGE) administering such ruthless and seemingly indiscriminate blows to government agencies and programs, all with an overarching motivating presumption: that every aspect of government is encumbered by wasteful and inappropriate spending.
DOGE’s discoveries with respect to some government agencies confirm that scrutiny is appropriate. USAID’s politically charged expenses go well beyond what most would consider appropriate taxpayer-funded humanitarian aid (though if this has been going on for decades, why was nothing done during President Donald Trump’s first term?).
Less obvious is the decision to target the IRS and impose mass layoffs.
Seven former IRS commissioners, who served under Republican and Democrat presidents, joined together to write a guest essay in The New York Times calling the decision a huge mistake. Analogizing to corporate restructuring, they rightfully questioned the illogical notion of axing personnel in a business’s accounts receivable department in order to cut waste and balance the books. Yet that is precisely what the Trump administration has done by laying off thousands of IRS employees, many of whom, according to the commissioners, “are directly involved in collecting unpaid taxes.”
The former commissioners go on to state the obvious: Reducing the nation’s ability to collect taxes will reduce the amount of tax revenue coming in, “which will in turn increase our nation’s deficit and add to our $36 trillion debt.”
They also dispel the notion that reducing the IRS’ capacity to collect taxes is equivalent to reducing taxes. “Shrinking the I.R.S. will not lower your tax obligation. That’s up to Congress.”
The former commissioners go on to acknowledge that the “I.R.S. could certainly improve its efficiency and effectiveness.” This point deserves additional commentary because the IRS’ track record in this regard leaves much to be desired.
One of the starkest examples of the IRS' lack of efficiency and effectiveness is its failure to update its technology. The IRS' system for storing and processing tax returns — the Individual Master File — was implemented in the 1960s and is still in use today. This system, which is coded in Assembly Language Code (ALC) and COBOL — the equivalent of Ancient Greek and Old Norse for computer programmers — is under serious maintenance risk because most of the computer programmers who were trained in these coding languages are no longer alive.
The IRS’ first attempt to update its systems came in the form of the Customer Account Data Engine (CADE) project. Initiated in 2000, with an expected deployment date of late 2001, the project was abandoned in 2009 due to delays and cost overruns, having spent $400 million.
Development of CADE 2, a more advanced version of CADE, began in 2010. Its initial phase of deployment was delayed nine years, from 2014 to 2023, and its anticipated date to replace the Individual Master File is not until fiscal year 2028, having spent billions in the drawn-out process.
In other words, opportunities for improvement in technology and other areas of return processing and taxpayer service at the IRS certainly exist. But DOGE’s sledgehammer approach, which The New York Times reports may entail cutting the IRS workforce in half, seems likely to cause nonstrategic disruption, making the country’s accounts receivable department anything but more efficient and effective.