What Would an Honest Effort to Reform the IRS Look Like?

Posted in: Politics

One of the classic examples of misdirected anger involves a stern, humorless clergyman who stands in his pulpit in front of rows and rows of mostly-empty pews. His booming voice full of anger, he tells his cowering flock that they will be punished because the church is so empty.

It never occurs to the good minister that the people whom he is hectoring and punishing are exactly the people whom he should be praising and rewarding. They are, after all, the people who came to church that day! The result of his fundamental error of judgment, however, is that more and more people are driven away, leaving the pastor wondering why there are so many evil people in the world.

This story comes to mind over and over again, whenever I think about how the Republicans, especially those who have been running the House of Representatives for the past four years, treat the employees of the Internal Revenue Service. Convinced that the IRS is somehow inherently evil—as if it is somehow wrong for the government to have an agency that enforces the tax laws, and as if every employee of the agency is somehow complicit in that evil—Republicans have been on a decades-long quest to delegitimize and undermine the agency that enforces one of our most complicated and important sets of laws, laws that make it possible for the country to prosper.

In two recent columns here on Verdict, I have discussed in some detail the ongoing assault on the IRS by the national Republican Party. In my April 23 column, I described the lather-rinse-repeat approach to attacking the IRS: set it up to fail with too little funding and too many tasks, attack its inevitable failures (isolated and understandable as they might be), and then use the anger that those errors have stoked to justify further budget cuts and increasingly onerous demands that the agency defend every aspect of its actions. The cycle repeats, with depressing regularity. (In that column, I also described how the Republicans’ ultimate policy objection—their claim that the U.S. tax system is too onerous—is simply wrong.)

In my Verdict column this past Friday, I described a recent report from the Republican staff of the House Ways & Means Committee (which, along with the Senate Finance Committee, bears primary responsibility for writing the country’s tax laws). That report was, in fact, not at all an objective report written by people with any apparent desire to make the IRS work better, but an effort to deflect the blame for the IRS’s various problems away from Republicans’ budget cuts.

In fact, as I described in that column, the report—even if one were to accept all of its findings and allegations as true, no matter how unsupported or tendentious the claims—merely says that the IRS is not as badly underfunded as it might seem to be, because the IRS’s top administrators have chosen to follow various laws that the Republicans do not like (but which have not been repealed, and which the IRS is not at liberty to ignore). “We might have screwed you up, but you screwed yourself up worse” might seem like a fun political point, but it is hardly a responsible assessment of how to deal with the current state of the IRS.

In today’s column, I will first describe two aspects of that report that I did not discuss in last week’s column. Both of those aspects reveal the way in which Republicans are acting like the vindictive vicar that I described above, punishing IRS employees who have nothing to do with the supposed problems at the agency.

My second purpose in today’s column is to sketch out what an honest attempt to reform the IRS would look like. Because every bureaucracy, in government and in the private sector, will make errors and will always fall short of ideal performance, no one should interpret a defense of the IRS (from me or anyone else) as a statement that all is well or that nothing needs to change.

But if we are going to look for ways to improve the performance of this crucial government agency, then we need to be sure that the proposed reforms are responsive to the actual underlying problems. As it turns out, the proper response is not to continue to punish the IRS by cutting its budget and calling its employees on the carpet, but by doing essentially the opposite of what Republicans have been doing since 1995, and perhaps longer. We need, in short, to increase the IRS’s budget, and simplify and clarify the laws that the IRS must interpret and enforce. Interestingly, it turns out that Republicans themselves in other contexts acknowledge that this is the better approach.

Punishing the People in the Pews: Republicans Vilify “the IRS” and Everyone Who Works for It

In my April 23 Verdict column, I noted that “many commentators on the left (and some on the right) understand that even the most lean government will need a competent and adequately funded tax collection agency,” after which I parenthetically described the pointless applause line in Senator Ted Cruz’s speeches, to the effect that he would completely eliminate the IRS. In the past, I have wondered whether it would be enough for someone like Cruz to simply rename the IRS the “not-the-IRS tax collection agency” and be done with it.

As I suspected, even some analysts on the political right have already mocked Cruz’s proposal (such as it is) to spread tax collection across an array of government agencies. There are still some people on the right who understand that the IRS is not a cabal of anti-conservative activists, but an agency staffed by people who are simply trying to do their jobs in a very trying environment. There are certainly aspects of the article linked above with which I strongly disagree, but on the basic question of whether it is possible to separate the policy question about how high taxes should be from the administrative questions about how best to collect those taxes, there are still some conservatives who are willing to say that the IRS is simply doing the best that it can.

None of those people, however, seems to have had any input in the writing of the report from the Republican staff on the Ways & Means Committee. There, as I noted in last week’s column, it was openly admitted (proudly, by all appearances) that Republicans in Congress have consciously decided to punish the remaining IRS employees, rather than trying to figure out how to make things better.

Consider the wording of a quotation that I noted in last week’s column, which I have highlighted here by underlining a few key phrases: “House Financial Services and General Government Appropriations Subcommittee Chairman Ander Crenshaw told the IRS that Congress ‘deliberately lowered IRS funding to a level that will make the IRS think twice about what you’re doing and why you’re doing it.’”

In one sense, saying that someone said something “to the IRS” is merely an example of “personification,” that is, using a verbal short-hand to identify the ultimate non-person that is taking the action. We use “Congress” and “the White House” and “Wall Street” in that sense all the time.

What is happening here, however, is different. The Republican staff is approvingly quoting a Republican committee chair for the proposition that it is important to punish an agency as a whole. That means that, even if the people who are responsible for some bad things that the agency did are already gone, the remaining workers at that agency will pay the price. When someone says that “the IRS” needs to “think twice” about its actions, lest all IRS employees be burdened with even more onerous budget cuts, there is a severe disconnect from reality.

Consider, for example, one of the major complaints in the Republican staff’s report, which is that the IRS has recently awarded bonuses to some employees. There is no context for that claim, only the assertion that the IRS’s leadership has “prioritized” employee bonuses, even when the agency’s budget is being reduced.

But what, exactly, is the point of reducing or eliminating bonuses for the people who remain at the IRS—people who have tried to take up the slack of the many employees who have departed and have not been replaced? Why, for example, should one of the employees who actually answered taxpayers phone calls—the one thing that the staff report says the agency should have been doing—be told, “You work for an agency that the Republicans in the House of Representatives have targeted for punitive action, so it does not matter how well you do your job”?

Morale at the IRS is at an all-time low, and the agency needs more than ever to guarantee that it retains the shrunken number of experienced people who still have the ability to make the agency work reasonably well. Institutional knowledge is essential to avoid repeating the mistakes of the past, yet House Republicans are saying to IRS employees: “It does not matter how well you do your job. We don’t like you, and we refuse to allow you to be rewarded even when you meet performance targets.”

Relatedly, the Republican staff’s report makes a big deal out of the fact that the IRS has continued to hire outside counsel to work on some of its cases. Anyone with any knowledge at all of how federal agencies work knows that this is common practice. Indeed, farming out federal functions to private actors has long been a goal of conservatives.

Nevertheless, one of the items that the staff report claims as proof of bad priorities by the IRS’s leadership is its decision to hire an outside firm to assist in a recent case. Here is how the report frames the issue: “The IRS has a legal division staffed with attorneys who are experts on tax law. The Department of Justice (DOJ) also has attorneys who specialize in tax law and litigation. Not only are these lawyers fully capable of conducting litigation, but their salaries have already been paid by taxpayer dollars.”

Of course, these are some of the same people who would be denied bonuses, as described above, even if they do their jobs well. (The Department of Justice, while not subject to the direct attacks that Republicans have inflicted on the IRS, is nonetheless a federal agency that has been subject to hiring freezes, shutdowns, and so on.) Moreover, there is no acknowledgement of the possibility that maybe, just maybe, the government’s staff of tax lawyers has been depleted by the Republicans’ attack on the IRS.

If, after all, one is an expert in tax law, one has alternatives in the private sector. Even the people who are committed to government service have limits as to how much undeserved vilification and punishment they can take. Some have (quite reluctantly) finally decided to move to greener pastures. Yet the remaining lawyers, no matter how much work they have to do, are expected never to need to hire outside counsel for especially important cases. To belabor the obvious, this makes no sense.

Even so, these two points—that the IRS is giving bonuses to some of its employees, and it has hired outside counsel to assist its employees—are apparently so important that the Republican staff’s report ends with this paragraph:

Prioritizing bonuses and user time while hiring outside counsel and cutting taxpayer assistance resources is unacceptable at a time when the IRS is hanging up on people as a ‘courtesy.’ Americans should expect excellence from their government, and doing ‘less with less’ falls far short of that responsibility.

And this is the ultimate insult. The title of the staff’s report is, in fact, “Doing Less With Less,” which is a quotation from an open letter from the IRS commissioner to the agency’s employees, from January of this year. The commissioner was describing how the IRS’s employees continue to do their best, even while reduced resources have made it impossible to continue to do the many things that the IRS is required and expected to do. Yet trying to make the best of a bad situation is somehow proof that the IRS is trying to do less with less, apparently by rewarding its best employees and by bringing in outside expertise when it is needed.

The Honest Approach to Reform: Doing More With More

Suppose, however, that someone completely disagreed with my analysis here as well as in my two earlier Verdict columns. Is the argument that the IRS is so fundamentally dysfunctional that the best thing to do is to disassemble it and start over? Or is the argument that the IRS has a lot of good things going for it, but it needs significant changes to be imposed upon it? As I noted above, no one should ever claim that the IRS or any other agency does not need to make some improvements. The question is: If a person honestly wants to make matters better, what would that person suggest?

As it turns out, even for people who think that the IRS’s internal problems are larger than I think they are, it does not matter whether one prefers the “start over” strategy or the “big internal reform” strategy. At least as far as assessing what the Republicans are doing, the answer is the same. Simply attacking and punishing the IRS and its workforce is not the way to fix whatever problems one might identify. In this, as in so many other areas of life, you get what you pay for.

In my May 1 Verdict column, I noted the recent problems that have emerged in the United States regarding some police officers’ use of deadly force against African-American citizens. Although people disagree about the levels of culpability of the officers involved, as well as other issues, the fact is that people across the ideological spectrum see a problem and understand that the way forward must involve devoting resources—money, specifically—to fixing these problems. If we were to take the approach that Republicans in Congress have taken toward the IRS, budgets for police forces would be cut, to express our collective anger about what we are repeatedly told are deviations from good policing.

But one need not take my word for it. When it is convenient, Republicans themselves will admit that punishing an agency is a bad idea. Consider, for example, John Cornyn of Texas, who is at the very top of the Republican leadership in the U.S. Senate. In a letter to The New York Times, Senator Cornyn recently defended his proposal to restore funding to prisons that have failed to address the horrific problem of prison rape.

Referring to a 5-percent reduction in federal grants for non-compliant prisons, which is required under federal law, Senator Cornyn argued that, under this system, “states lose the very money they need to develop and deliver victim services. This makes no sense and harms victims.” He closed his letter by calling for “a holistic rather than a punitive approach to much-needed reform.”

I have no particular view about the prison reform legislation that Senator Cornyn was defending. My point here, of course, is simply to note the bizarre disconnect between the idea that prisons cannot be financially punished for failure to reduce a terrible problem, but the IRS can and must (according to Senator Cornyn and his compatriots) be punished because its employees “do less with less.”

What would honest reform look like? In any organization, when a problem emerges, the people who are responsible (if any) should be identified and either removed or disciplined. At least as far as “the IRS non-scandal scandal” that so enrages people on the right goes, this has been done. (In fact, people who apparently had done nothing wrong were also nonetheless sacrificed.)

The people who remain in the agency should be treated well, and not made to pay for other people’s mistakes. If the agency involved has longstanding problems, such as the repeated failures to carry out technology upgrades at the IRS, then Congress must provide the resources necessary to review the failures and fix the problems. The worse, and the more longstanding, the problems at the agency are, the more money and attention will be necessary. Certainly, a “start over and replace the IRS” approach would require the most money of all.

Therefore, if the complaints against the IRS were truly motivated by a desire to improve the agency’s performance, we would see Republicans doing exactly the opposite of what they are actually doing. Their approach has already created a slow-motion disaster, and if Republicans insist that we continue down this path, things will only get worse.

  • Sam Brewskie

    How can you trust any agency to do more by giving them more? I believe they must prove that they can do a better job with integrity with what they have. If they need more then they must prove that they can make good changes first. It does not make sense to give anyone or agency more resources when they can not do their job with integrity and responsibility in their current state. The IRS must earn more resources by showing responsibility, efficiency and high ethical standards. I personally would not give any of my kids more if they have already shown by actions that they can not handle what they currently have.

    Is this article about Honest Reform or an attack on Republicans? Both sides need to get HONEST about the problems this country faces.

  • “Republicans have been on a decades-long quest to delegitimize and
    undermine the agency that enforces one of our most complicated and
    important sets of laws, laws that make it possible for the country to
    prosper.” While I reluctantly accept the necessity of taxes and, by extension, the need to collect them, I do not understand how you can argue that these laws make it possible for the country to
    prosper. At least not in their present form. The government of this country has grown to an immense size and power by collecting excessive taxes. Taxes are by definition a burden on the economy and the greater the burden, the less prosperous the economy can be. Therefore please allow me to suggest my own formula for reforming not only the IRS but the government that spawned it. Two steps are required. Replace the entire body of tax law now extant with a very simple code that exacts a flat tax on people only one that taxes people based on what they take out of the economy. No loopholes, no exemptions, no deductions, no BS. Your first 10000 dollars in income is taxed at the lowest rate (say .5%) and every additional 10000 dollars earned is taxed at 1% and so on up to a maximum of say 10%. All income is treated equally, no capital gains or other “special” cases. Make this law a part of the constitution so that politicians will no longer be able to mess with it. Step two, reduce the size, reach and scope of the IRS to that which is necessary to collect that tax. Since there is much less to worry about, I’d guess the IRS could shrink to maybe 10% of what it is now. Corporations would not be allowed to retain any earnings beyond that needed to maintain their cash flow in good order. All the rest must be distributed to the owners and therefore taxed as personal income.. You could probably print that tax code on a postcard sized document in plain language that any 4th grader could understand. The reduction in the cost of complying with that simple law would free up billions of dollars that private persons could then use to finance the rest of their business. You could even do away with the annual April 15th tax angst by not requiring the filing of a “tax return”. There would be no refunds because the tax paid is based on your earnings only, not on how many deductions you can come with. Many of the so called deductions are there to promote some kind of social engineering goal of meddling wonks that are really no proper function of government anyway (tax breaks for solar?) You may have guessed that I subscribe to the KISS principle.

  • James Hurley

    Mr. Neil H. Buchanan in this column is again defending IRS employees whereas he should be criticizing them for allowing the agency to becoming a political tool for the benefit of Democrats. He takes issue with the complaints of Republicans over the paying of bonus to IRS employees. He writes “Of course, these are some of the same people” (Republicans and/or conservatives) “who would be denied bonuses, as described above, even if they do their jobs well.” Does he know that Lois Lerner was paid over a hundred thousand dollars in bonus during her time with the IRS and some of her activities bordered on the criminal side of the law if not actually crossing the line. The IRS certainly aided and abetted in its decline in public approval because some of the employees hid wrong doings by people in the agency – and it also appears some of that hiding of wrong doings is still going on.