By Albert R. Hunt
WASHINGTON: In today’s bitterly polarized environment, the Internal Revenue Service has become even more of a whipping boy for U.S. politicians as it struggles with deep budget cuts and accusations of incompetence and, some say, illegal actions.
That makes the tax-collection agency an ideal situation for John Koskinen.
A year ago, top White House aides Jeff Zients and Gene Sperling talked to Koskinen about a job in the Barack Obama administration. He demurred, though he told them, if you’ve got something disastrous that no one else wants to manage, call me.
They did; he says it took him “about 15 seconds” to accept the job of IRS commissioner.
In an earlier life, he was a successful entrepreneur, specializing in turning around troubled companies. He was attracted to public service, and during the Bill Clinton administration, he was put in charge of the so-called Y2K crisis, the preparations to avoid cataclysmic computer malfunctions as the clock turned to Jan. 1, 2000. The transition went seamlessly.
When George W. Bush took office, Koskinen stunned his colleagues by accepting a job as city administrator for the often-ridiculed District of Columbia government. There, too, he was a success. In 2008, he became chairman of Freddie Mac and paved the way for the restructuring of the troubled mortgage-finance giant.
You get the idea: Koskinen loves challenges. Many Republicans hate the IRS. Its budget has been cut for four consecutive years, while its responsibilities have increased. It has a major role in the implementation of the Affordable Care Act, and it is embroiled in a controversy over the tax-exempt status of political groups.
In less than three months on the IRS job, Koskinen already has bolstered morale at the agency as well as its standing on Capitol Hill. He’s more than halfway through a tour of the 25 largest IRS offices in the U.S.
“After four years of what we’ve been through, there is an amazing amount of energy and commitment,” he says. “One common theme is we don’t have enough people to provide services to taxpayers.”
Since 2010, the IRS budget has been reduced, in real terms, by $1 billion, and it has 8 percent fewer employees. Yet Congress doesn’t hesitate to add to the agency’s workload. “With all the grumbling, there’s confidence that the IRS will get the job done,” Koskinen says.
He says the budget cuts are shortsighted. Historically, for every additional dollar the IRS receives from Congress, it is able to raise five times as much with better collection and enforcement. In his latest budget, Obama has recommended a 10 percent increase. Although congressional Republicans are certain to balk, they may be receptive to the argument that reduced funding means taxpayers are having trouble getting quick assistance from the agency.
The major Republican accusation is that several years ago, IRS officials in Cincinnati targeted the tax-exempt status of conservative political groups. That did occur in some instances, yet a multitude of investigations has failed to uncover evidence that the scrutiny was politically directed. Most likely, it was a misstep by mindless bureaucrats. There still are inquiries and relentless requests for information from Congress, especially the House Oversight Committee.
To the delight of lawmakers such as the committee’s chairman, U.S. Rep. Darrell Issa of California, this political hot potato has tied up hundreds of IRS employees who have to answer inquiries and slowed IRS investigations of tax-exempt groups.
Entities such as Karl Rove’s American Crossroads, the groups sponsored by David and Charles Koch and Priorities USA Action, which backed Obama’s re-election, claim to be principally social-welfare organizations, not political ones. This isn’t reality, of course, but the IRS’ proposed regulation to prevent abuses of tax-exempt status has drawn a firestorm of criticism, including 143,000 comments, many of them the result of organized campaigns. Even Koskinen supporters such as U.S. Sen. Orrin Hatch of Utah have warned the commissioner to junk the proposals.
As Koskinen points out, the proposed changes wouldn’t affect the ability of Rove or anyone else to spend money. They just would be required to disclose their contributors.
He is taking these criticisms and the budget cuts in stride.
“This is a vital agency that touches virtually every American, and it’s under attack,” he says. “That’s a challenge that’s hard to pass up.”
It may be an impossible job. If so, he’s the right man.
Hunt is a Bloomberg View columnist.