Tax Analysts Blog

IRS Missteps Will Hurt Tax Administration

Posted on Jun 3, 2013
The IRS is underfunded. The Service has seen its budget cut more than $1 billion since 2010, and those cuts are starting to take their toll, both on enforcement and filing season efficiency. The IRS Oversight Board wrote last week that “the current budgetary path is no longer sustainable.” Former IRS Commissioner Douglas Shulman and former acting Commissioner Steven Miller frequently implored Congress to restore the IRS’s budget. And many academics and commentators have argued that it is absurd to impose huge new responsibilities on the IRS (through FATCA and healthcare reform implementation) while reducing its resources. But as sympathetic as the IRS can seem on one hand, its absurd expenditures on conferences and training videos, along with the appearance of political bias resulting from the exempt organization scandal, have made it almost inconceivable that it will receive more funding anytime soon.

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.

Read Comments (5)

amt buffJun 3, 2013

The single most damning fact is that nobody blew the whistle. To me that is
proof positive of a partisan culture in the IRS.

Imagine the outrage about that if this had happened to Media Matters and
similar groups under the Bush Administration. Is it even conceivable that
nobody would have blown the whistle?

Joe SansoneseJun 3, 2013

"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

This sentence needs a light pass of the editing pencil:

"But in the end, the real winners will be taxpayers. Obviously the public gains
when an out-of-control, political hit squad such as the current IRS is no
longer able to persecute citizens who are opposed, as is their constitutional
right, to the Orwellian nightmare this thuggish agency embodies."

There. Much better.

edmund dantesJun 3, 2013

Mr. Sansonese, you hit the nail right on the head.

joe sansoneseJun 3, 2013

Mr. Dantes, I did make one crucial mistake that I must correct, else I shall
play into the incompetence, "poor customer service" defense currently on offer
from the Administration. The IRS is not out of control, and much more's the
pity. The IRS is—and was—very much in somebody's close control and scrutiny.

The question of course is whose? Unsurprisingly, the best answer is the
simplest; which is to say, the correct answer is the same answer as would be
given to this question: "Who benefited" Who stood to gain from the deliberate,
well-thought-out malice exhibited by the "public servants," one after the
other, whose arrogant contempt for any notion of accountability has been on
display the for the past month?

Can there be any doubt who that person is? Any doubt at all?

edmund dantesJun 4, 2013

When the IRS is subverted toward punishing political opponents, it is all
Americans who are the losers. I refer you to Peggy Noonan's observations in the
Wall Street Journal. Keep in mind that these partying IRS agents are all paid
far above the national average salary. They are paid far more than the
grass-roots tea partiers that they targeted, of whom they demanded "what is in
your prayers." And they have fat pensions and first class medical plans.

This was an abuse of trust of biblical proportions. More is coming out--there
is evidence that contributors were targeted by IRS in turn, after donor lists
were submitted to them. This would have been unthinkable in a Republican

At least 88 IRS employees participated in this fiasco without blowing a
whistle. That ought to be 88 pick slips right there. Lois Lerner takes the
Fifth because she knows darn well what she did was criminal--yet she stays on
the payroll? Nothing wrong with that picture? Clearly the IRS has more budget
than it needs.

I'd also fire every attendee of the Anahiem conference who failed to object to
the lavish spending. Why did they think that because the President was a
Democrat such behavior was appropriate?

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