When Donald Trump first ran for president, he wasn’t shy about calling out what he described as unfair tax loopholes for wealthy private equity firms.
But according to former Labor Secretary Robert Reich, Trump has done a complete about-face since returning to office.
“On the campaign trail, Trump railed against private equity tax loopholes,” Reich wrote in a post on X on Wednesday.
“As president, he’s enacted more tax breaks and regulatory rollbacks that benefit the industry — and his war on the IRS has gutted the agency’s capacity to audit PE firms. Promises made, promises broken.”
Reich linked to a New York Times article detailing how the IRS’s efforts to hold private equity and venture capital firms accountable have essentially collapsed under Trump’s second term.
IRS Effort to Audit Private Equity Firms Has Unraveled
Back in 2023, the IRS had launched a sweeping new initiative aimed at closing a major enforcement gap.
For years, the agency had done little to audit large partnerships such as private equity, real estate, and venture capital firms.
These businesses operate under a complex set of tax rules that many IRS staff have little experience with.
Under the Biden administration, the IRS hired and trained hundreds of examiners to dig into these partnerships.
Early efforts uncovered aggressive tax shelters used by companies like Occidental Petroleum, with Treasury estimating that these schemes could cost the public over $100 billion in lost revenue over a decade.
The agency had planned to audit 75 of the largest partnerships in the U.S., many of them with over $10 billion in assets.
The goal was to shift enforcement focus away from working-class taxpayers and toward high-dollar tax avoidance structures.
But since Trump’s return to the White House, the entire operation has unraveled.
Nearly all of the IRS leaders and specialists involved have either quit or been laid off.
Many were recent hires, and when the administration moved to cut costs by laying off probationary employees, the partnership audit team was disproportionately affected.
“Because these folks were relatively recent hires, they were probationary employees. When all probationary employees were let go, lots of talent walked out the door,” said Danny Werfel, the former IRS commissioner under Biden.
According to tax attorneys, audits of large partnerships have plummeted.
One lawyer who handled 15 such audits in 2024 said that the number dropped to just three in 2025. Another reported zero new audits last year.
Lobbying Pressure and Right-Wing Attacks
As the IRS tried to enforce the tax code, it faced growing pressure from business lobbies and anti-tax groups.
Organizations like the National Association of Manufacturers and the Alliance for IRS Accountability called for the dismantling of the partnership audit program.
The Alliance even claimed the audit group was a “prime example of government weaponization” targeting political opponents, though it offered no evidence.
At the same time, top IRS officials faced personal attacks. Holly Paz, a senior official overseeing audits, is now suing the agency, alleging that administration officials leaked her private employment information to Fox News.
These pressures have contributed to a wave of resignations, leaving the agency with few experts capable of auditing the nation’s most complicated and profitable tax structures.
Billions at Stake
The IRS’s shift away from auditing partnerships comes at a high cost.
A recent study by researchers from Stanford, NYU, and other top schools found that auditing complex partnerships generated $20 in collected taxes for every $1 spent.
That’s over eight times the return of corporate audits.
Meanwhile, profits from partnerships have soared. IRS data shows that profits jumped from $267 billion in 2000 to $2.6 trillion by 2022.
Much of this growth is tied to businesses converting from corporations to “pass-throughs”, entities where income is passed directly to partners and taxed under intricate rules.
The original rules for partnerships date back to the 1950s, when they were mostly used by small family businesses.
Today, they’re used by sprawling investment firms with global reach.
Reich: A Clear Betrayal of Campaign Promises
For Reich and other critics, Trump’s record doesn’t just reflect a policy shift; it represents a broken promise.
While Trump campaigned on closing loopholes and draining the swamp, his actions in office have given more power and flexibility to the very industries he once criticized.
The result, they argue, is fewer audits, less accountability, and more room for sophisticated tax avoidance.
As Reich put it simply: “Promises made, promises broken.”
IMAGE CREDIT: ”Donald Trump” by Gage Skidmore, via Flickr. Licensed under CC BY-SA 2.0. Image adjusted for layout.