Reports say that the Trump administration is almost ready to get their hands on some of the most private information in America: tax returns. This is because they want to deport a record number of immigrants. Experts say that the unprecedented move could cost the government tens of billions of dollars in tax income because it makes people less likely to follow the rules.
The Washington Post says that Immigration and Customs Enforcement (ICE) is trying to get a deal that would let it compare IRS data with its own to find the names and addresses of people it thinks are in the U.S. illegally.
Tiffany Williamson, a fellow in governance studies at the Brookings Institution, said that the move “would mark a really stark shift in IRS policy.” “The IRS has always been very, very careful about sharing information.” The Post says that this includes getting a court order to share even simple information like a taxpayer’s name and address.
The Post said that the temporary head of the IRS stepped down after his agency turned down the DHS’s request for taxpayer data. Fortune asked the IRS for a reply, but they didn’t answer.
Carl Davis, heads of research at the Institute for Taxation and Economic Policy, said, “There’s no doubt this will make it harder for the IRS to do its job.”
$97 billion in tax money
ITEP found that undocumented residents paid $97 billion in federal and state taxes in 2022. Davis and Williamson say that number will drop by a lot if people think that their information can be used against them.
“Many undocumented immigrants file returns as a sign of good faith,” Davis said. “They hope that this will help them get legal status in the future.” “Some undocumented immigrants have been able to get legal status in the past by showing that they paid their taxes, followed the rules, and did what they were supposed to do,” he said.
“For many people, filing a return is an act of hope,” he said. “And it’s looking more and more like that act of hope will be used against them to try to kick them out of the country.”
People’s names and addresses are kept on file by more than just the IRS, but Williamson said that the IRS’s data is the “gold standard” because it is full and is updated often.
“It’s updated every year, and it comes from every employer. There’s so much information about people in it that’s why we keep it so safe,” she said. “Don’t just think about how much money you make and where you live. Think about your family situation and whether you have anyone who depends on you. There are a lot of things that matter.”
Davis said that it doesn’t matter how much the IRS shares data; just the idea that taxpayer data is no longer private will hurt tax collection.
“Just the fact that this is being talked about and reported on will make immigrants less likely to follow the rules,” he said. If someone is afraid of being deported, they might start working under the table for cash or without paperwork. Also, new immigrants will be less likely to pay their taxes right away, he said.
Because the IRS is cutting staff, the U.S. is already losing $500 billion in tax revenue this year, which is about 10% of the total tax revenue for the year.
