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It’s the Internal Revenue Service. NOT the Inferno Revenue Service! …but it’s close! Every government shutdown comes with a silver lining, and this one’s a big one. The IRS has announced it is furloughing nearly half of its employees, effectively putting much of its day-to-day work on ice.

As of October 2025, the Internal Revenue Service has suspended most of its operations. Call centers, correspondence units, legal teams, and administrative offices are largely offline. Only “essential services”—those tied to filing season work, data protection, and law enforcement—remain active.

Which raises a provocative question: is this trend just another temporary breakdown, or the early signs of something bigger?

Are we watching the IRS, the backbone of America’s tax machinery, begin to crumble for good?

And if so, is the U.S. only one bold legislative move away from replacing the IRS altogether with something radically simpler, like a flat tax?

Cracks in the Foundation

Steve’s three major forces are hollowing out the IRS and setting the stage for dramatic change.

1. Shrinking Infrastructure and Staff

The furloughs highlight a more profound issue: the IRS is already stretched thin. Its contingency plans show that the agency now prioritizes only what’s absolutely necessary to keep revenue flowing. Hiring freezes, early retirements, and layoffs have already reduced capacity.

With fewer auditors, agents, and support staff, the IRS’s ability to respond or enforce compliance has eroded. For taxpayers—especially small businesses and middle-income filers—this feels less like a temporary slowdown and more like a permanent decline.

2. Political and Budgetary Hostility

Defunding the IRS isn’t a side effect—it’s a political strategy. Proposed GOP budgets call for steep cuts to IRS funding, especially in taxpayer services and enforcement. The result: longer wait times, fewer audits (particularly of high-income individuals and corporations), and declining guidance.

Politically, the IRS has become an easy target—painted as bloated, intrusive, and inefficient. The agency is constantly under attack from both Congress and the executive branch.

3. Technological Turbulence

You’d think automation and AI would make tax collection easier. In reality, the IRS’s outdated systems, scanning backlogs, and delayed modernization efforts have made things worse.

The government’s experiment with dual leadership—a shared CEO for the IRS and Social Security—shows both ambition and desperation. If digital platforms can handle most tax functions, what’s left for the IRS to actually do?

The Flat Tax: The IRS’s Unlikely Replacement

Here’s where things get intriguing. As the IRS weakens, the flat tax, once dismissed as a political fantasy, is starting to look like a plausible “off switch” for the entire system.

Imagine one piece of legislation, call it the “Tax Simplification Act,” replacing today’s labyrinthine tax code with a single rate and minimal exemptions. Overnight, much of the IRS’s complex bureaucracy becomes unnecessary.

Here’s why this idea has traction:

• Simplicity Wins: A flat tax needs no army of auditors or policy interpreters.
• Crisis as Cover: With the IRS visibly faltering, reform can be sold as “fixing” what’s broken.
• Automation Ready: Collection can be handled at the source by employers or financial platforms.
• Defunding by Default: Starving the IRS of funds slowly ensures it can’t resist change.
• Political Payoff: Flat taxes sell fair, efficient, and anti-bureaucratic irresistible talking points.

In short, one bill could transform the IRS from a sprawling bureaucracy into a mere clearinghouse—or even phase it out entirely.

Look at it this way. Today’s IRS furloughs aren’t just an administrative hiccup. They’re a symptom of an institution under siege politically, financially, and technologically.

If the current trajectory continues, the U.S. might soon reach a point where the IRS is simply too weak to sustain itself. At that point, replacing it with a flat tax wouldn’t look radical; it would look inevitable.

Final Word: If everyone pays the same rate, what would politicians even campaign on anymore?