With a dramatic change of administrations in the USA coinciding with a new tax filing season, uncertainty is affecting a lot of sectors of life including the income tax system. Currently, our country of 350 million + people requires $7 trillion annually to run the government. In 2024, about $5 trillion in revenue that came in was not enough to cover the budget.
While the political battle continues, those of us obligated to fulfill the US tax laws as they stand today are just trying to keep it simple.
Our duty at Washington Tax Services is to keep our client's tax compliant while paying the least legal amount of taxes possible.
As the billionaire class and their advocates seem to continue to be unwilling to pay more in taxes to cover that deficit, they have been looking to Project 2025's DOGE to bridge the gap. So far the DOGE launch appears to have only caused mostly disruption/confusion over any meaningful deficit reduction. The latter would require substantially more taxes from the wealthy, a dramatically reduced defense department and/or an unwillingness to fulfill the country's obligation to meet Social Security and Medicare funding for our seniors as interest on the debt, defense spending and social security/medicare represent 90% of the budget.
OPERATIONS UPDATE: While the DOGE reduced the IRS workforce by about 7% in February of 2025, IRS e-filing and professional portals for communicating with the IRS seem to be intact and basic operations seem in place. IRS agents are pursuing large tax debts and communicating with us on behalf of our clients. Some of those reduced from the workforce were late hires from the Biden administration who were tasked at pursuing wealthy non-filers. The IRS veterans and infrastructure largely remain.
IRS VS TARIFFS: While some folks get a certain "street cred" in their political group by saying "abolish the IRS," they don't offer many alternatives replacing the $5 Trillion that the IRS cash cow brings in. Perhaps what they are really telling us is that the US govt should be reduced to 19th Century levels? But what about TARIFFS? Can they replace INCOME TAXES? Most certainly NOT. Tariffs on our trading partners (and US consumers) will cause inflation and ultimately reduce trade and reduce the amount of money brought in through tariffs. Why do some in the billionaire class push for tariffs and sales taxes affecting the middle class and working people? Because when implemented, their group pays less income and estate taxes.
SO are we STUCK WITH INCOME TAXES? Pretty much for now. IF we are honest with ourselves, for decades we have built our income tax system into a social engineering machine: mortgage interest deduction to promote home ownership, a pandemic relief stimulus mechanism (still available for the 2021 year by April 15, 2025)(?), earned income credit distributions to the working poor and a vehicle/lever to reduce said taxes to establish wins for your political group. And the business world has embraced it too: LENDERS require income tax returns to document your financial situation, for example. Even MOST RED STATES rely on State income taxes (with only a few exceptions). Income taxes are ingrained in our society and culture. They are painful, but they also achieve some fairness by having wealthier people contribute more to our system than average people.
