After a scandal-filled year in which the IRS’s credibility dropped to levels unseen since 1998, the federal tax collector needs an image overhaul. The United States relies on voluntary tax compliance, and that suffers if taxpayers no longer trust that the agency charged with administering the nation’s revenues is fair, competent, and impartial. It will take bold leadership to prevent that trust from being completely lost, and the Senate Finance Committee’s favorable report for nominee John Koskinen should be a good first step.
The IRS has been without a commissioner since November 2012. That’s when Douglas Shulman stepped aside, leaving Steven Miller to serve as acting commissioner. That state of affairs seemed to suit President Obama just fine -- the White House didn’t even drop hints about who the next commissioner would be for the first six months of the vacancy. That left the IRS without a full-time, confirmed leader for both a difficult filing season and the May exempt organizations shock wave.
Obama’s hand was forced when Lois Lerner and Miller planted a question at the May meeting of the ABA’s tax section about the handling of conservative organizations’ exempt organization applications. Apparently Miller and Lerner decided that this was the best way to acknowledge the IRS’s misconduct to the public. The Service was attempting to get out in front of the imminent release of a TIGTA report on EO applications, but its already strained credibility on the issue was stretched even further by the bumbling method used by the acting commissioner and his top EO official.
Lerner’s announcement prodded Obama to force Miller to resign. In his place, the president appointed Daniel Werfel to effectively be acting commissioner. Werfel’s technical title was principal deputy commissioner and deputy commissioner for services and enforcement because Miller had served too long as acting commissioner. In August the president finally picked a nominee to be commissioner, selecting Koskinen, who had served as non-executive chair of Freddie Mac.
Would an IRS commissioner have prevented the exempt organizations scandal? No. Shulman was still serving as commissioner when all of the wrongdoing occurred, and he seemed unable to effectively monitor or control Lerner’s unit. But it doesn’t take much to imagine that an effective leader could have figured out a better way to both announce and handle the EO scandal. Certainly the agency couldn’t have done any worse than planting a question at a conference and then having the face of the scandal, Lerner, linger in office for months while lawmakers savaged the IRS in hearing after hearing.
Obama is almost completely to blame for the IRS being without a commissioner for so long. Shulman announced his impending exit in October 2012, but the White House didn’t act until it was forced to by the scandal. Dilatory nominations to tax positions are a hallmark of the administration, showing just how low a priority tax administration is for the president.
But Congress has its share of the blame, too. Koskinen was nominated in August, but Finance is just now acting on it. Some delay while vetting occurs is to be expected, but there are a lot of politics involved. Many Republicans wanted to hold the hearing after Congress completed its investigation into the EO matter, allowing GOP lawmakers to vilify Koskinen during questioning. There were also delays attributable to the government shutdown and showdown over the debt ceiling.
Koskinen has been lauded as a corporate restructuring expert. It is hoped that he will be able to revitalize the IRS in the way he restored confidence and credibility to Freddie Mac after the 2008 meltdown. He faces a tall order. But just having a full-time political appointee at the head of the agency should help when dealing with a hostile Congress, managing the Service’s ever-shrinking resources, and removing officials responsible for the mismanagement of EO applications and the scandal’s aftermath.