The real solution to the IRS mess: A simpler tax code

Daniel Werfel, a former controller in the Office of Management and budget, was tapped by President Obama to serve as acting head of the IRS.

Daniel Werfel, a former controller in the Office of Management and budget, was tapped by President Obama to serve as acting head of the IRS.

By T.J. Mayes

On Tuesday, acting IRS Commissioner Daniel Werfel announced an initiative to improve and “restore the integrity of IRS operations,” that includes appointing a chief risk officer to improve internal controls. While this seems like a big move, this initiative will likely do little to calm the public relations storm surrounding the scandal and Lois Lerner, currently-suspended director of Exempt Organizations for the IRS who appears to be at the center of the biased targeting.

There is no evidence thus far that the White House was involved with the targeting, and President Obama mirrored the outrage of his ideological opponents in a press conference:

If you have the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous. It is contrary to our traditions.

An examination of the history of the IRS tends to show the opposite: the agency has never been neutral or nonpartisan.

Political targeting is actually consistent with IRS tradition. Indeed, it has been noted by experts of the agency’s history that “in almost every administration since the IRS’s inception the information and power of the tax agency have been mobilized for explicitly political purposes.”

It all goes back to the New Deal. President Franklin Roosevelt’s son, Elliot, once said that his father “may have been the originator of the concept of employing the IRS as a weapon of political retribution.” Targets included media outlets and political dissidents.

President Kennedy initiated, and President Johnson continued, the Ideological Organizations Audit Project, which a Senate Select Committee found “directed tax audits at…groups solely because of their political beliefs…[and] established a precedent for a far more elaborate program of targeting dissidents.” That far more elaborate program was carried out by President Nixon. One of the articles of impeachment adopted by the House Judiciary Committee alleged that the president initiated tax investigations in a discriminatory manner.

The list goes on and on, which brings us back to the present. Is it possible for the IRS to rebound from this latest setback? Polling shows that the IRS had regained institutional credibility after the scandals of the 1970s by 2000. It is unclear how the agency will rebound this time, but there are a couple factors that differentiate this scandal from the scandals of the past and make me think that it won’t:

  • Mistrust of institutions generally: After Bush v. Gore, Enron, 9/11, and the financial crisis, public trust in institutions (governmental institutions specifically) is at an all-time low. This does not bode well for what was already the least popular agency in the federal government.
  • Obamacare: The IRS will be tasked, in part, with implementing the Patient Protection and Affordable Care Act. Obamacare’s lack of popularity and possible potency as a strong Republican issue in 2014 give House Republicans every incentive to drag the scandal out as long as possible.

The behavior of the agency transcends generation and political party. Given its mission, the IRS is an inherently arrogant and political institution. There seem to be only two ways to mitigate this: simpler tax laws and more congressional oversight.

When a married couple files a relatively simple income tax return, the IRS is unlikely to show up and audit them. Audits are usually triggered when an individual or corporate taxpayer is taking advantage of one of the thousands of loopholes, exemptions, or exclusions in the 73,000-page tax code. The agency’s audit power is rooted in a complex tax system. A simpler, dare I say radically simpler, tax code diminishes the audit power, and thus the potential for abuse.

Both parties in Congress are guilty of abusing its oversight responsibility, but someone needs to hold the IRS agents’ feet to the fire. A former IRS employee closed her testimony in a 1997 Senate oversight hearing by saying:

The arrogance of the IRS is outrageous and harmful. We lose more than we gain by allowing the IRS to operate in this manner. Congress must demand accountability from the IRS. Congress must shine the spotlight on the IRS and never switch the power off.

Improved congressional oversight of the IRS may be one area where good politics actually leads to sound policy and more accountability.

Posted by on May 29, 2013. Filed under Economy,National Politics,Recent News,Top News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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