The Trump administration recently announced that it would be laying off approximately 6,700 workers at the Internal Revenue Service, about 8% of the people employed by the agency. Tens of thousands of federal employees at other agencies are also losing their jobs.
The timing could not be worse. We’re in the middle of the tax season with corporations and individuals facing filing deadlines in March and April. Millions of returns will need to be processed. Refunds will be due. Questions will need to be answered. But that’s not all.
In just a few short months, Congress will be debating – and probably passing – new rules that will significantly change our tax laws. Republicans are pushing to either extend or make permanent many of the provisions of the 2017 Tax Cuts and Jobs Act, most of which expire at the end of this year. There are proposals to eliminate taxes on tips, social security income and overtime wages. The Democrats will be fighting some of these provisions, arguing their effect on future deficits. Regardless, there will be an enormous amount of change to rules, forms and guidance that will need to be made by the IRS.
The remaining employees at the agency, already demoralized and now seriously short-staffed, will now be asked to handle this looming workload. Taxpayers and their accountants will need to be patient. I can already foresee my profession’s future frustration as they wait for guidance on a myriad of tax changes that will affect their clients. After barely recovering from all the disruptions caused by the pandemic, these layoffs are sure to set things back.
But let’s not pretend this isn’t part of a wider trend.
We all know the technology already exists to do much of the work that many IRS employees do now. My clients already use tech platforms to automate their accounts payment and payments. These systems – which leverage AI and optical character recognition – can very accurately (and affordably) scan, read and extract data from any document and ensure that the information is integrated into their accounting systems, where payments are automatically scheduled for review and disbursement. Considering that most of the tax returns filed are done in a similar fashion – and are mostly routine – it seems obvious that similar systems could be doing the same functions, which would probably eliminate a much greater percentage of workers who have already been chopped by the current administration.
Look what technology is doing elsewhere. “Look what technology is doing elsewhere. The financing platform Klarna announced last summer that AI would enable it to reduce its workforce by 2,000 through natural attrition.” Morgan Stanley, JP Morgan Chase, UBS and other Wall Street firms are building AI-based systems that are eliminating the need for investment analysts, wealth managers and other human workers. Google, Ikea, Salesforce and a number of other firms are rapidly replacing their workers with AI systems. Mark Zuckerberg has publicly said that AI applications will be doing the work of mid-level engineers at Meta this year.
About $80bn was allocated to the IRS under Joe Biden’s Inflation Reduction Act to “modernize” tax collection. Government being the government, I’m sure that progress has so far been slower than it should be. But if you’re working at the IRS, or any federal agency, do you not see the writing on the wall? And if you’re working in customer service, marketing, accounting or any of these jobs in the private sector do you also not see what’s happening?
The firing of federal workers is a preview of what’s about to happen in the corporate world. CEOs at numerous companies have already demonstrated that technology can do the work of people and replace them. And they’re just getting started. The tech companies like to say that AI will “work alongside” humans or “increase employees’ productivity” but that’s nonsense. Like the federal workers, many in the private sector are about to be replaced too.
