The tax administration is far more efficient than that. The IRS has 79K workers out of a total workforce of 158M, or 1/2000 workers. Federal taxes are about 19% GDP (28% of GDP including state and local taxes.) The IRS costs $14.3B to run and collects 19% of $25.46T = $4,800B or 0.3% of collected taxes.

> If IT really improved productivity, wouldn't you expect that that number would decrease, since Tax Administration is presumably an area that we should expect to see great gains from computerisation?

Those gains are so great that tax administration has been computerised for more than half a century now.

We could certainly save an awful lot more in tax preparation for the economy as a whole if we sent out pre-filled tax forms (the IRS already has all the information required for most people) like other countries do but the tax preparation companies have made a lot of contributions to politicians to prevent this.

That's how government digitalization has functioned in my country. It hasn't improved things, it just moved all the paper hassle to a digital hassle now where I need to go to Reddit to find out how to use it right and then do a back and forth to get it right. Same with the new digitalization of medical activities, a lot of doctors I know say it actually slows them down instead of making them more productive as they say they're now drowning in even more bureaucracy.

So depending on how you design and use your IT systems, they can improve things for you if done well, but they cal also slow you down if done poorly. And they're more often done poorly than great because the people in charge of ordering and buying them (governments, managers, execs, bean counters, etc) are not the same people who have to use them every day (doctors, taxpayers, clerks, employees in the trenches, etc).

I kind of feel the same way about the Slack "revolution". It hasn't made me more productive compared to the days when I was using IBM Lotus Sametime. Come to think of it, Slack and Teams, and all these IM apps designed around constant group chatting instead of 1-1, is actually making me less productive since it's full of SO .... MUCH ... NOISE, that I need to go out of my way to turn off or tune out in order to get any work done.

The famous F1 aerodinamic engineer, Arain Newey, doesn't even use computers, he has his secretary print out his emails every day which he reads at home and replies through his secretary the next day, and draws everything by hand on the drafting board and has the people below him draw them in CAD and send him the printed simulation results through his secretary, and guess what, his cars have been world class winning designs. So more IT and more sync communication, doesn't necessarily mean more results.

Perhaps we could be optimistic about people and assume the amount of real, legitimate tax fraud and evasion is pretty low. If we took the latter scenario you present—increasing efficiency means the same amount of people will do more work—and assumed this effort is instead applied to decreasing the number of random errors (which might result in someone overpaying or underpaying), we wouldn’t necessarily expect to see a change in the expected value of the taxes. But, it could be “better” in the sense that it is more fair.

A third option: technology investments improved the efficiency of the previous tax base, which allowed the expansion of the tax base - through additional enforcement activity, increasing the tax base in absolute terms but also returning the overhead to its historical norms.

Without tracking the size of the tax base in inflation-adjusted terms, hard to account for.

(The cynically, you’re probably right re: useless bureaucratic expansion)

A large change on an otherwise stagnant activity... I would expect it to increase quickly.

If that number is stable for that long, it means it's defined by some factor that doesn't depend on its performance.