By now almost everyone knows the details of the IRS’s inappropriate scrutiny of conservative and Tea Party groups applying for section 501(c)(4) status. That scandal continues to grow. The latest information suggests that up to 88 IRS employees might have been involved – a far cry from the two rogue agents reportedly fingered by Miller. By the time everything plays out (which could be years), expect far more than three high-ranking IRS managers to have lost their jobs or their credibility.
But the IRS is also taking heat for its lavish spending on conferences and travel. It had already apologized for spending money on a Star Trek-themed parody video for a 2010 conference in Anaheim, Calif. New acting Commissioner Daniel Werfel had to apologize again over the weekend for more expenses related to the Anaheim event after House Republicans released information that the IRS had produced a video featuring an elaborate song-and-dance routine. A TIGTA report due out on Tuesday will show that many IRS agents stayed in presidential suites (which can cost between $1,500 and $3,500 a night) while traveling. The Service spent over $4 million of taxpayer funds on the Anaheim conference alone. (The IRS’s budget for conferences was over $50 million for 225 events from 2010 to 2012, according to the TIGTA report.) Werfel said such expenditures were from a “prior era” and wouldn’t happen again. But the damage to the agency’s reputation has already been done.
The IRS has never been very popular, politically or otherwise. Once Republicans took control of Congress in 1995, they were determined to reform the Service. The 1998 IRS Restructuring and Reform Act, while containing many positive provisions, set tax enforcement back for years. In fact, it was only during President Obama’s first two years that lawmakers began to praise the IRS’s enforcement efforts and to beef up the agency’s budget, particularly in the area of offshore and international tax policing. The gains made during that brief period are already being lost, according to the IRS Oversight Committee. The revenue generated by IRS enforcement activities fell from $57.6 billion in 2010 to $50.2 billion in 2012.
IRS employees and managers are certainly going to be losers in the wake of the agency’s numerous missteps on EO enforcement and overspending. But in the end, the real losers will be taxpayers. Obviously the public suffers when the IRS is no longer able to provide adequate phone and customer service. But tax administration in general will be damaged by further cuts to the IRS or by another restructuring designed to make the IRS’s enforcement function toothless (the price the agency might pay for its apparent political bias). And poor tax administration means lower revenue collections, which harm the treasury and the government as a whole.