Two tax stories collided in Washington this week. House Speaker Mike Johnson set a “skinny” scope for Reconciliation 2.0, the potential partisan legislative package that would help end what’s now the longest government shutdown in U.S. history.* And, on Tax Day, Senators grilled IRS CEO Frank Bisignano about the Trump Administration’s proposed $1.4 billion cut to IRS funding.
More on the confluence of these events, as well as a look to the future, below the fold.
* Caveat: it’s partial.
The first story is legislative. As the funding lapse for the Department of Homeland Security enters month three, Senate Republicans have shifted public rhetoric about Reconciliation 2.0 from expansive to targeted. Since the new year, the ambit for this hypothetical budget bill has ranged from affordability measures to endowment tax reforms to more tax cuts. (The Work Opportunity Tax Credit also has been in play.) This week, Senate Majority Leader John Thune said the prospective bill would stay “tight and focused” on funding DHS for three years, which put a damper on—but did not entirely extinguish—talk of a significant tax component.
Everything should become clearer next week, when Senate Republicans expect to release a budget resolution that would set the scope of Reconciliation 2.0. Language has been drafted, and the Senate Parliamentarian has been consulted. If the budget resolution gives no reconciliation instructions to the Senate Finance Committee, there won’t be a tax component—and Democrats would have a harder time raising tax amendments in the vote-a-rama. There’s a face-saving component to a skinny bill this spring, with any heavier lifting saved for a more substantive Reconciliation 3.0.
The second story is administrative, about the IRS’s implementation and enforcement capabilities. In early April, the President’s FY 2027 budget proposal asked Congress for $9.8 billion to fund the IRS, a $1.4 billion (12.2%) reduction from FY 2026. The IRS’s Congressional Budget Justification indicates that essentially all of this reduction would come through staff reductions and related cost savings, with the pain concentrated on enforcement and technology infrastructure spending (18% and 63% reductions, respectively). There’s some snowballing: these proposed budget reductions come on top of FY 2026 cuts and rescissions of Inflation Reduction Act funding. Although House appropriators appear headed towards a slightly higher number for IRS funding ($10.2 billion), the trajectory is monotonic.
This tension over IRS funding is familiar. At an April 15 Senate Finance Committee hearing, IRS CEO Frank Bisignano defended past and proposed personnel reductions. “Some people think, more agents, more agents,” said Bisignano. “I think, more technology, more technology.” Although artificial intelligence and advanced analytics may improve IRS enforcement, it’s hard to overcome the human void created by a 27% decline in IRS employees since January 2025. Indeed, the Yale Budget Lab projects that those IRS staff reductions—concentrated in enforcement—will reduce federal revenues by $600 billion over ten years. For taxpayers seeking IRS assistance over the phone, Nina Olson reports increases in wait times and decreases in level of service since January 2025. And perceptions about IRS laxity may fuel noncompliance among both sophisticated and unsophisticated taxpayers. These data sit uneasily beside administration claims of speedy IRS service and a 12% increase in enforcement revenue since October 2025. Whether the IRS’s budget process represents a necessary reconfiguration or an abdication of responsibility isn’t settled, but the budget process shouldn’t serve as a stealthy and idiosyncratic substitute for the tax cuts proposed for Reconciliation 2.0.
These parallel legislative and administrative stories emphasize that, in tax law, substance and implementation are deeply connected. Legislative changes require multiple layers of administrative infrastructure—from guidance to exam to collections—to translate statutory text into the appropriate amount of revenue. An anemic IRS also shifts compliance away from the public sector and towards private actors, including lawyers and accountants. As I have argued, this rebalancing can affect the substantive content of fully developed law.
These dynamics indicate that, although politics may keep tax out of Reconciliation 2.0, there are more principled reasons for a longer pause between the One Big Beautiful Bill Act and another round of tax legislation. The OBBBA continues to have transitional effects, and the fall 2025 government shutdown slowed guidance projects connected to the new law. The dust might settle, at least a bit, before Congress takes up a putative Reconciliation 3.0 (or bipartisan tax bills in the post-midterms lame-duck session). And that’s probably a good thing.
