The problem of the IRS’s dwindling credibility

David Gura May 16, 2013

The problem of the IRS’s dwindling credibility

David Gura May 16, 2013

Another day and more news out of everyone’s favorite tax agency. Less than 24 hours after canning the last one, President Barack Obama named White House budget official Daniel Werfel as the new acting head of the Internal Revenue Service.

Suffice it to say, this hasn’t been a great week for the IRS — what with reports IRS functionaries targeted conservative groups that had applied for tax-exempt status with extra scrutiny.  It’s a scandal the likes of which the IRS hasn’t seen in decades, and it’s shed light on an agency that wasn’t in great shape to begin with. 

The IRS is a far cry from what it used to be in the 1960s, says Lloyd Mayer, who teaches tax law at Notre Dame.

“The IRS was often held up as a model government agency, a place you wanted to work,” he says.

He and other experts I talked to, including someone who recently left the IRS, told me morale there is low. For one thing, the agency is understaffed.

“There is an enormous number of IRS managers — soon to approach more than half of them — who are eligible for retirement,” Mayer says.

Of course, a scandal’s not going to help recruitment. NYU Law Professor Daniel Shaviro says staffing is just one part of the problem.

“The IRS is scandalously underfunded,” he says. “And it’s all out of politics.”

The agency’s budget has fallen by a billion dollars since 2010. If it got more money, the IRS could do more enforcement. But lawmakers know the prospect of more audits probably wouldn’t thrill constituents. So, like many regulatory agencies, the IRS has been forced to do more with less.

Howard Gleckman is with the Tax Policy Center. He says the IRS is under-resourced and overwhelmed, and it’s developed “a culture of secrecy.”

“The agency that expects 150 million taxpayers to fully disclose everything about their lives is unwilling to disclose very much at all about what it does,” he says.

And that’s more than just collecting taxes. “There are huge portions of the Internal Revenue code that really are about public policy,” says John Colombo, who teaches at the University of Illinois College of Law.

Like tax deductions to incentivize behavior, including home ownership. It also has to determine which groups should be tax-exempt and which shouldn’t. And if that’s not enough, the IRS will have to enforce the president’s new health care law.

Colombo says the IRS’ new commissioner has to focus on restoring the agency’s credibility.

No one’s ever going to like the IRS, he says. (We are talking about taxes here.) But it has to be respected.

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