BALANCING THE BOOKS
July 22, 1998
President Clinton today signed the most sweeping overhaul of the Internal Revenue Service in 40 years. But what will it all mean for the average taxpayer? Fred Goldberg, IRS Comissioner under President Bush, explains the reforms.
PHIL PONCE: The new IRS reform bill the President signed today is the first big overhaul of the agency in decades. Among other things, it puts new limits on charging interest and penalties, gives innocent taxpayers more protection when spouses or ex-spouses fail to pay taxes, shifts the burden of proof to the IRS in many tax court cases, creates a nine-member oversight board, including six people from the private sector, and gives the commissioner more flexibility to bring in managers from the business community. We're joined now by Fred Goldberg, who served as IRS commissioner under President Bush. Mr. Goldberg was on the National Commission on Restructuring the IRS, which came up with a basic frame work for the new loan. Mr. Goldberg, welcome.
A RealAudio version of this segment is available.
April 15, 1998
A discussion on the debate for tax reform.
February 3, 1998
Charles Rossotti, the new IRS chairman, on the future of the agency.
October 22, 1997
The Senate Finance Committee's investigation of the IRS.
October 10, 1997
President Clinton proposes his own IRS reform plan.
September 25, 1997
The Senate Finance Committee continues its hearings on the IRS.
September 24, 1997
A discussion of how the IRS treats regular taxpayers.
April 11, 1997
A panel discussion on the embattled IRS.
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International Revenue Service
FRED GOLDBERG, Former IRS Commissioner: Hello, Phil.
The changes for the individual taxpayer.
PHIL PONCE: Looking at the big picture, what do these changes mean to the individual taxpayer?
FRED GOLDBERG: I think the purpose behind the entire legislation is to reconnect the IRS with the expectations that the American people have for their tax administrator. For the first time in a long time you have the Congress, the administration, individuals, practitioners, and the IRS, itself, speaking from the same page in terms of this is what the IRS ought to look like, this is how it ought to act, this is how it ought to treat citizens that it deals with day in and day out.
PHIL PONCE: And how do you see the citizens are going to be treated from this point on?
FRED GOLDBERG: I think it's common sense. The American people understand and expect to pay taxes, and they're willing to pay their fair share, and they want the IRS to be sure that those who don't get into the system, but at the same time the people want an IRS that is responsive, doesn't treat them like crooks, uses common sense, doesn't follow the rule book blindly and put people in a position where they can never get out of a hole they're in, and it's really a more practical, user friendly kind of system. Today when we deal with financial institutions, we can get through in a telephone call. We can get our account questions answered quickly. Well, the IRS owes, and I believe the IRS wants to give the American people that same kind of service, and that's what this legislation is all about.
PHIL PONCE: So you're saying the IRS is going to be more like a financial services company than like a law enforcement agency?
FRED GOLDBERG: In some ways. I mean, I know there is a law enforcement aspect that's important, but at the same time, most Americans try to pay what they owe. They're dealing with a system that is grotesquely complex, with rules that none of us can really understand, and when you have a system that's inflexible, it doesn't respond quickly, it doesn't acknowledge what we acknowledge with each other when we're dealing with our families and our friends and our colleagues and our people with whom we have business dealings, or sports, that there are some basics about how you deal with each other, and the IRS ought to function under those same rules.
"It's common sense. And I think that's what this bill is all about."
You shouldn't—and you mentioned innocent spouse—when you have a spouse who had nothing to do with something that's very wrong on a tax return and it turns out that is the former spouse the IRS can find, and they chase her and chase him and chase her and chase him and chase and chase, because that's the law. It's not they're doing anything wrong, but at some point that makes absolutely no sense whatsoever. Penalties and interest—I mean, most taxpayers end up paying more penalties and interest than they pay in tax. Well, that doesn't make any sense. You can't explain it to your kid and say, yes, this makes sense, this is reasonable, because it's not. You call to find out what your account is. You call to figure out what you owe. You get nothing but a busy signal. That's not right. You're trying to figure out how to get right with Uncle Sam and you pick up the phone to get it resolved, nobody answers. And that's just—it's real easy. It's common sense. And I think that's what this bill is all about.
PHIL PONCE: And how would common sense apply to the area of audits, which is something that so many taxpayers are concerned about?
FRED GOLDBERG: It's interesting. The way common sense applies to audits is you want it done quickly; you don't want to deal with four or five people over four or five years. You want to deal with one person. You want to get it done quickly. And you want the person to look you in the eye and respect you, treat you as a citizen, as someone that in a sense you are working to find a right answer, you're not a bad guy, and that's what I think the American people want, and that's what they expect when you do surveys about audits. You know what people complain about? It takes too long; they were rude; they treated me like a crook. That's what bothers the American people. I think at the end of the day most folks want to get it right, are willing to try to get it right, but want it to happen in a less hostile kind of judgmental environment. And, again, I think that's what this bill tries to accomplish, both in its specific provisions and its general provisions.
PHIL PONCE: So the provisions of the law are going what—they're going to have an impact on how IRS employees actually approach customers—how would—
FRED GOLDBERG: There are two different levels of impact. The one is very specific—the innocent spouse provision, the reduction in penalties that the president mentioned—that's really very significant for 2 ½ million Americans. The innocent spouse provisions—those are very specific provisions that will benefit very specific individuals. At a completely different level it's really a question of attitude. It's a question of how you think about your job if you work for the IRS. And that's where this oversight board becomes so important. It's where the commissioner's flexibility, in terms of personnel, becomes so important. It's where the fact the commissioner is going to be there for long enough to get done what his vision—carry out what his vision is and be held accountable for results.
PHIL PONCE: A five-year term term.
FRED GOLDBERG: The five-year term. Commissioner Rossotti is doing a terrific job. The president, Secretary Rubin, deserve enormous credit for recruiting him and getting him in the position. Give him the time to do it. Give him the time to deliver. If you have an oversight board that doesn't change, you can get coherence, you can get focus, you can—
PHIL PONCE: And who's on the oversight board?
FRED GOLDBERG: You can get to that attitude—
The IRS advisory board.
PHIL PONCE: Who are the members of the oversight board?
FRED GOLDBERG: Well, the representative of the secretary, the treasury, the commissioner, a representative of the workers at the IRS, and six private life, private sector individuals. And, again, they're not running the IRS. They're not making decisions about day to day operations. They have nothing whatsoever to do with tax—
PHIL PONCE: What is their authority?
FRED GOLDBERG: Their authority—in a sense, their authority is to look at the forest, not the trees, to kind of look at where we ought to be heading with the IRS over long periods of time. Change is difficult. It takes years to get done, and think about—you can't think about your colleagues. If you're telling them march left one day and march right the next and go forward one day and back the next, it's a mess; it's chaos. And what the service needs, the IRS needs, is continuity. The notion that what they are being told to do today they will be told to do tomorrow.
PHIL PONCE: And this oversight board is—
FRED GOLDBERG: That's because—
PHIL PONCE: --because of what the length of their term—
FRED GOLDBERG: The length of their terms. The fact they bring expertise from the private sector. Measures are very important. There's been all of this stuff in the news lately about the IRS misusing measures, misusing enforcement quotas. That's a terrible problem. Well, on the other hand you've got to measure performance, you've got to figure out how you're doing. This board can play a critically important role in defining what success is. If you tell the IRS success is how many foreclosures you get, what are they going to do? They're going to do foreclosures. If you tell the IRS success is also treating taxpayers reasonably, is getting cases over quickly, is not—is not acting in the sort of grotesquely unreasonable ways, and if the IRS believes you're serious, that's what the IRS will do when the board can define those standards and come up with the kinds of measures and follow through on those measures.
PHIL PONCE: So there is a connection between the existence of this board and how the taxpayers are treated.
FRED GOLDBERG: Absolutely. I guarantee, Phil, all you do is a specific provision, the burden of proof, innocent spouse, interests and penalties, that's all you do, we'll be back here in five years, three years, talking about the problems, because they're symptoms, they don't get at the core question of what do we want from the IRS, how do we hold them accountable, how do we provide for the continuity to deliver on that vision that I think Commissioner Rossotti has laid out in very compelling terms. It's not hard when you're raising your kid. You've got to be constant with the message if you're working with colleagues, you need to be consistent with the message, you need to follow through. And having been there, I have enormous respect and affection for the individuals at the IRS. It is a group of individuals who, by and large, if they know what is expected of them are going to deliver. Good, bad actors, like every organization—I mean, all of us see it in any walk of life. There are their problems, and one of the points you mentioned about for flexibility in dealing with the work force—it will get rid of the few bad actors, and you can reward and promote the overwhelming number who were trying to do a good job. The commissioner could never do that before. Well, it's real hard to do the job if you don't have that authority and the commissioner has that kind of authority now under this legislation. And the issues are going to change; the problems are going to change; but if you have a management structure and an oversight structure in place, then maybe you don't run in to the next batch of problems as severely as this last set.
PHIL PONCE: Mr. Goldberg, thank you very much for being with us.
FRED GOLDBERG: A pleasure, thank you.