By David Cay Johnston
Serious problems in IRS management culture will only worsen as Congress focuses on trivia and ignores the problems created by conflicts in mission, law, and a lack of funds to do the work, especially training.
Lost in the scandal over how 80 or so low-level IRS employees in Cincinnati tried to cope with irreconcilable conflicts among the law, regulations, and their duty to investigate applications for section 501(c)(4) status is a deeper story -- one getting zero attention from Congress so far.
It is the story of the IRS's management culture and how it is shaped by congressional oversight. It is partly a story of how an agency has become so depersonalized that it treats taxpayers as objects rather than people. It is the story of how the culture of secrecy that grows from section 6103 affects not only external communications but also internal attitudes. It is the story of an agency that is drowning, unable to do the multiple tasks assigned to it by a Congress that has slashed its training budget by 83 percent since 2010.
It is also the story of a major mistake -- having neither tax lawyers nor tax administrators run the agency since 1997, when a high-tech industry executive, Charles O. Rossotti, became commissioner. The IRS needs a commissioner steeped in the principles of tax and deeply experienced in tax law administration, including enforcement.
Over the years, I have interviewed hundreds of IRS agents, managers, executives, and specialists about how they see the agency. Many were unable to see beyond the narrow confines of their position, while others offered nuanced historical, organizational, and societal insights.
There was one consistent theme, however: the observation that far too many managers and executives lack management and personal skills, look out for their careers to the detriment of their subordinates, and simply do not know how to manage. People are treated as objects, not human beings.
Lois Lerner, the exempt organizations director in the IRS Tax-Exempt and Government Entities Division, is an example of weak IRS management. Despite taking steps to stop the improper selection of those applying for 501(c)(4) status from deeper scrutiny based on their names rather than their self-described plans of action, Lerner did not follow through or make sure her directives were carried out. Now she is on paid administrative leave for what could be years because of federal personnel rules that make it hard to fire managers despite a demonstrated lack of fitness for their jobs.
National Taxpayer Advocate Nina Olson has said that dehumanization has come to characterize practices in the IRS and that that dehumanizing attitude upsets staff and works against compliance and enforcement. "When you work with pieces of paper and computer screens, it is easy to think about a taxpayer as a widget, as opposed to thinking about a taxpayer as a live human being who has problems," she said. Olson told me that the tendency to see people as widgets is at work internally, too.
That tendency is entirely understandable when you think about the IRS as what it is: a law enforcement agency that has been deputized to be a kind of federal welfare department, too.
To appreciate that, imagine you were just made chief of a big city police department. Now imagine that the legislature each year made thousands of changes to the criminal code, drawing exceptionally fine lines between various levels of offenses -- say, making it a crime to smoke a joint in public but not to have one in your pocket.
Now imagine that the legislature changed the rules on who could be handcuffed, when, and whether they could be handcuffed from behind, in front, or to a bicycle rack and then changed those rules frequently.
Now imagine that five-sixths of your training budget, already too small, is cut and that your frontline officers and even clerks can lose their jobs if they file a report late or accept a free cup of coffee at an eatery.
Finally, add new duties to decide who gets to stand in line at the soup kitchen or get a cot at homeless shelters, the street cop equivalent of the earned income tax credit and other social benefits the IRS administers.
That's the IRS today -- a bureaucratic donkey, created by breeding a tax agency and social welfare agency, that gets no respect. Managing that crazy mix of missions without enough money results in a management culture that is just what so many career employees have complained to me about: managers who treat people as objects, often are not well trained, and who must deal with subtle, confusing, and sometimes contradictory demands in the law compounded by opaque directives from upper management.
Now throw in bonuses to get people to stay. Congress says the IRS cannot reward agents and officers based on the money they find or collect, but managers can be rewarded for how many cases they close and how quickly. That creates situations like those the Senate Finance Committee heard about during 1998 hearings, when audits were shut down so managers could make their bonuses. Incentives affect behavior.
Now imagine you were just offered the job of police chief, or central office command staff, or even police captain running a precinct. Would anyone in their right mind who had the talent and personal skills to work elsewhere -- and for more money -- take that job?
Even assuming that the lousy IRS pay was no object, would you as a tax professional want to run the IRS or one of its divisions? I have been asking that question of tax lawyers and others for the past month and have yet to hear a single person say they would take one of those jobs.
Imagine being a new IRS executive under attack over that $4.1 million Anaheim training conference with the video of IRS managers line dancing. When corporate America does that, it's called team building. When the IRS does it, it's called a scandal. Lost in the uproar is a basic fact: Nearly a third of managers in the IRS Small Business/Self-Employed Division are new to the Service or to management. That training costs less than $1,600 for each of the 2,609 managers trained, including airfare and four nights in a hotel. But there's no point in trying to explain. Ears -- and minds -- are closed.
Paul Cherecwich Jr., chair of the IRS Oversight Board, which Congress created in 1998, told me he doesn't see any reason for outrage over the per-person cost for the Anaheim training conference. "It was pretty cheap per person," he said. "You could have broken that up into seven smaller meetings and it would have cost you more than one large meeting."
Rep. Darrell E. Issa, R-Calif., upset that the IRS spent $17,000 on a "happiness" consultant at the meeting who drew pictures of various celebrities, denounced the IRS for its "culture of excess."
Seventeen thousand dollars? Congress is looking at an invoice for 0.0000005 percent of the federal budget. Even granting that the idea of trying to demonstrate happiness to IRS employees was nonsense (although it is hard to imagine any agency whose workers would be more in need of happiness counseling), that is not even a drop in the government spending bucket.
Where was the outrage two years ago over the $60 billion wasted and stolen in Afghanistan and Iraq -- an amount uncovered by the official Commission on Wartime Contracting, according to USA Today? Or how about the $20 billion NPR reported U.S. taxpayers spent for air conditioning in those two countries? That's right, readers -- roughly twice as much as the IRS annual budget just on air conditioning for our troops, diplomats, contractors, and others in Afghanistan and Iraq.
Last year we spent roughly as much to train Afghani military and police as we did on the IRS. Can we spell "priority"?
And let's not forget how much contempt some lawmakers have shown the IRS Oversight Board. Nancy Killefer, who once chaired the board, was given just three minutes when she appeared before the House Ways and Means Oversight Subcommittee in 2004. Former Rep. Amo Houghton, a New York Republican, literally turned his back on her and talked to aides the entire time Killefer testified.
Cherecwich, a retired corporate tax lawyer who has been on the seven-member IRS Oversight Board for more than six years, said he recalls having been "courteously treated" by the Senate Finance Committee and said he "occasionally chats with" House Ways and Means Committee staffers.
Cherecwich said that when he does chat with Senate staff, it is principally about the Finance Committee's "failure to schedule hearings for people who have been nominated for positions on the IRS Oversight Board. I am disappointed that we have had two vacancies for a long time."
The four IRS Oversight Board members who represent the public -- which is to say the taxpayers -- believe it is "completely inappropriate when you are on hard times to reduce your accounts receivable department," Cherecwich said. They think that is just "shortsighted thinking, to cut the budget of the group that brings in all the money," he added.
Cherecwich said he thinks cutting training by more than 80 percent will prove disastrous. I concur.
When I took a graduate course in public management, one of the core insights the professor taught was about how bureaucracies respond to politicians. Without oversight, agencies wander, doing what works for their internal organizational needs. With micromanagement, they become paralyzed. And faced with politicians they distrust, bureaucracies devise ways to whitewash, eyewash, and paint over problems.
There is a real problem with the management culture at the IRS. Congress can fix that. It can start by listening to the IRS Oversight Board. It can recognize that an agency with not nearly enough money to do its job will make far more mistakes and cost taxpayers far more in delays and errors.
Railing about $17,000, however, is not going to fix any of that. Indeed, it will only make things worse for taxpayers and the IRS.
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