By David Lawder
WASHINGTON (Dailyexe) -U.S. Treasury Secretary Scott Bessent on Tuesday said the Trump administration has cut $2 billion from the IRS information technology budget without operational disruptions and intends to save hundreds of millions more by automating processing of paper forms.
Bessent testified before a U.S. House of Representatives Appropriations subcommittee hearing stating that last year, the IRS allocated around $450 million for paper processing activities, employing almost 6,500 full-time workers specifically for these tasks,” she mentioned. “The Treasury plans to decrease this expenditure down to less than $20 million by the conclusion of President Donald Trump’s potential second term through strategic adjustments and automated processes.
Savings so far have come from eliminating, renegotiating and refocusing “wasteful” information technology (IT) and professional services contracts, including unused software licenses that had been auto-renewed for years, Bessent said, adding that this effort would reduce future Internal Revenue Service outlays by hundreds of millions of dollars per year.
Bessent defended the Trump administration’s proposed fiscal 2026 cut of almost $2.5 billion from the tax collection agency’s budget in the White House’s fiscal 2026 budget proposal. The proposal also aims to slash spending on education, housing, and medical research for $163 billion in discretionary savings.
He mentioned that the majority of the IRS reductions would be achieved by decreasing their IT spending, describing the current budget as “inflated” due to ex-President Joe Biden’s clean-energy Inflation Reduction Act. This act, enacted in 2022, injected an additional $80 billion into the IRS for technology improvements and tax collection efforts. However, following Republican-led budget proposals have cut this extra funding almost in half.
“I am confident that we will make substantial progress in the IT and right-size the payments system, the collection system,” Bessent said. “As I’ve repeatedly said, my priorities are collections, privacy and customer service.”
He disagreed with assertions by Democrats that the cuts would impair tax collections, saying it takes years to train enforcement personnel for high-end audits.
I think, with more intelligent technology and leveraging the current AI advancements, we can improve our collection processes,” Bessent noted additionally. “I anticipate that these collections will remain quite strong, just as they have been this year.
DEBT CEILING ‘WARNING TRACK’
Bessent declined to provide a forecast on when the Treasury would exhaust its borrowing capacity under extraordinary debt ceiling measures but said it was “not far away.” He vowed that the U.S. government would not risk a payments default or use any “gimmicks” to try to circumvent the limit, which will ultimately be increased or suspended.
“I will tell you, just as an outfielder running for a fly ball, we are on the warning track,” Bessent said, using a baseball term indicating that a player was close to crashing into the stadium wall. “And when you’re on the warning track, it means the wall is not far away.”
Several independent analysts believe the Treasury might be able to prevent a payment default until later in the summer even without raising or suspending the debt ceiling.
Bessent said he agreed with his Biden administration predecessor Janet Yellen’s view that the overall U.S. debt level should be viewed as a percentage of U.S. economic output.
“Both Secretary Yellen and I concur that the crucial figure is the debt-to-GDP ratio. We aim not only to manage and reduce the total amount of debt but also to increase our GDP,” explained Bessent, who has previously faulted the Biden administration for overspending.
Bessent mentioned that the Treasury was considering significant modifications in the manufacturing process of nickel coins to reduce the production costs beneath five cents. Additionally, he stated, “I think the dime remains profitable.”
(Reported by David Lawder; Edited by Paul Simao)
