Washington Feuds Over IRS Oversight

The aftershocks of last week's troubling Senate hearings on Internal Revenue Service (IRS) abuses are still reverberating in Washington.

The hearings, which documented IRS wrongdoing, will probably lead to major changes in how the IRS is managed - although Congress and the administration strongly disagree over who should oversee the tax agency. Meanwhile, the IRS is taking steps to attempt to make the agency more user-friendly. House Republicans, sensing a useful political issue, are trying to harness public concern to their ideas on overall tax reform.

House Ways and Means Committee chairman Bill Archer of Texas says he will bring an IRS reform bill to the House floor before Congress adjourns. "If last week's hearings showed anything, they showed that the IRS needs new thinking and a new direction," Mr. Archer says. The committee will work from a proposal - sponsored in the House by Reps. Rob Portman (R) of Ohio and Benjamin Cardin (D) of Maryland - that would implement the recommendations of the National Commission on Restructuring the IRS.

The bill calls for an IRS Oversight Board of seven members who are not full-time federal government employees, plus the Treasury secretary and a representative of the Treasury employees' union. The board would then appoint a commissioner with expanded management powers to a five-year term.

The Portman-Cardin bill would also strengthen taxpayer rights and make it harder for Congress to make changes that further complicate the tax code. Sen. Bob Kerrey (D) of Nebraska and Sen. Charles Grassley (R) of Iowa are sponsoring a similar measure in the Senate.

Recipe for conflict?

While praising some aspects of the proposals, the administration opposes a citizens' board, which it calls "a recipe for conflicts of interest, less accountability, and less trust," and has threatened a veto. Its plan would create a 20-person IRS Management Board made up of the deputy Treasury secretary and other government officials. It would also create a second advisory board of 14 private-sector professionals to advise the Treasury secretary on IRS management issues.

Supporters of the Portman and Kerrey bills oppose an official board, which they say would allow for increased political influence over the IRS. "If the political appointees at the Treasury Department could have solved the IRS's problems, they would have done so long ago," Archer says.

"It's perplexing to me personally why this administration would send a message to the American taxpayers that despite what they've been hearing, the IRS does not need comprehensive reform," Senator Kerrey says.

While insisting that the abuses revealed are "not the systematic and pervasive way taxpayers are treated by the IRS," IRS Acting Commissioner Michael Dolan moved quickly to address them. He referred the four cases discussed during the Senate hearing to regional commissioners for a complete review. He appointed a special manager to handle other cases referred to the committee, which received another 2,000 complaints about the IRS last week. He directed all district and center directors to review their complaint mail from the last several months and ensure complaints are resolved. The 33 district directors were also told to hold monthly taxpayer forums staring Nov. 15. And he will hold a meeting on taxpayer rights with IRS executive and compliance managers in the next 45 days.

GOP smells a vote-getter

Tax reformers in the House have also seized the opportunity to argue for complete overhaul of the tax system. House majority leader Dick Armey (R) of Texas says he will join Rep. W.J. "Billy" Tauzin (R) of Louisiana on a three-city tour debating the relative merits of a flat tax, which he favors, and a consumption tax, which Reps. Tauzin and Archer prefer. Under a flat tax, all taxpayers would pay about the same percentage of their income in taxes. A consumption tax would tax goods and services at the point of sale.

Republicans clearly believe they have a winning issue in tax reform: House Speaker Newt Gingrich says it will be a major priority for the GOP in 1998 - an election year: "We're prepared to move toward a simple, honest, fair tax code in a very bold way."