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Is this as big of a deal as it sounds? I mean he works for the government.. who had access before?
Yes, it is a big deal. Even within the irs you do not have uncontrolled access to tax returns.
Know who else has access to tax payer records, every IRS employee. Stop trying to make this like “oh my gosh I can’t believe anyone should have such access “. I trust Elon more than any IRS employee.
And I trust any random person off the street far more than I trust Musk. I spend a great deal of effort trying to keep my data out of the hands of Musk and his crowd out of a sense of self-preservation.

This is handing very sensitive personal data to a group who has made it clear that they are my (as well as most of the people in the nation) enemy and want the worst for us.

> every IRS employee

No that’s a lie. That’s not how it works.

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Today is a very good time to file a tax return filing extension (aka Form 4068) giving the likely compromising of our taxpayer data and it's also a very good time to contact your state Attorney General and your members of Congress on this ongoing crisis.