Statement of Commissioner Ernest J. Dronenburg, Jr.

 

I would like to take this opportunity to commend my fellow Commission members and our Co-Chairmen, the Honorable J. Robert Kerrey and the Honorable Rob Portman for having completed such a comprehensive review and study of the challenges that face the Internal Revenue Service as we enter the twenty-first century. The product of our labor, our report to Congress, is in my opinion, a valid, workable, and well reasoned blueprint that if followed through implementation will exceed the desired result contemplated by Congress in drafting the legislation that created the Commission.

I voted for the final report and concur wholeheartedly in its findings and with all its recommendations save one. With respect to the recommendation relating to governance and the Executive Branch, it is my contention that the Commission has not gone far enough. When faced with the continuing enslavement of his peopleís minds and bodies, Moses said to Pharaoh, "let my people go." In order for the Internal Revenue Service to reach its potential and be successful in meeting the challenges that it faces, IRS must be released from the bondage of the Treasury Department and the conflicting policy making functions that are necessarily its highest priority.

The current Secretary of the Treasury certainly, and past Secretaries generally, have all been very capable individuals. But to successfully reform itself, the IRS must have the ability to work within the government unfettered by the political trade-offs and necessary distractions inherent to the duties of any successful Secretary of the Treasury. Monetary policy, capital markets, international economics and tax policy to name but a few, are all legitimate distractions that serve to prevent any Treasury Secretary from providing the necessary long term strategic vision that the Service is in such desperate need of.

The Restructuring Commission has recommended that, with respect to the Executive Branch, the Department of Treasury be relieved of the oversight responsibility of a major portion of the administrative functions of the Service in favor of a corporate model Board of Directors. This is to be accomplished while maintaining otherwise the existing line of authority within Treasury. As proposed, the operation of the Board will undoubtedly enhance strategic focus and long-term independence. The proposed design is as good as can be achieved without changing fundamentally the relationship between Treasury and the Service. I believe a true restructuring, as the Commission was charged by Congress and the President to plan, would not, as this approach did, bow to political "realities." To do it correctly, would be to propose surgery and the removal of the Internal Revenue Service from the Treasury Department completely

Inside the Beltway, this may seem to many a bold and unrealistic proposal. But for someone like myself, who has spent the last 18 years as a member of an elected board of tax administration, the solution is obvious. In my State, Tax Board members are accountable not to a cabinet level agency, not even to the Governor, but solely to the people of the State of California. The accountability to taxpayers that we at the Board experience on a daily basis is not something the Service is accustomed to. The commitment to the ideal of independence and accountability in tax administration is an important step in establishing the level of taxpayer service and efficiency that will be necessary to maintain the confidence of the American people in our voluntary tax system in years to come.

The problems faced by taxpayers interacting with IRS are legendary. The interminable delays and lack of urgency. The total lack of authority and accountability at all levels. And the absence of even the most basic forms of strategic and visionary management. So long as the Service is subordinate to Treasury and her other priorities, even under this new board design, these problems will remain a constant. The management of a 100,000 person agency, with as critical a role to play in the successful operation of government, and that has as personal an impact on nearly every American, requires clear, direct and continuous leadership.

The Commissionís proposed governance structure, including a Board of Directors, will go a long way in putting the Service on the right track in approaching and solving many of the problems otherwise identified in our report to Congress. As proposed, there may be some incidental confusion with respect to turf and responsibilities as well as some inefficiencies with respect to separation of duties, but nothing like what exists today. The actual constitution of the proposed Board of Directors, including the choices made relative to the length of terms and the membership and make-up of a Board, have been well thought out here. Fundamentally, however, that element of the report is of no real importance to me.

A separate department entirely, whether headed by a board or a commissioner, but completely severed from Treasury, is the most obstacle free and organizationally correct structure, in my opinion. It removes any law enforcement considerations and establishes the proper separation between the policy makers and those charged with administration. In my mind, the single most important factor is a commitment to a governmental structure that manifests the greatest amount of independence in the Service. The resulting continuity of leadership, strategic focus, authority and accountability can be brought to bear on the challenge of attaining the level of administrative taxpayer service and efficiency necessary to reestablish the confidence of the American people in their tax system as we enter the twenty-first century.

Accordingly, my alternative recommendation to Congress with respect to the governance portion of the Commission report would be to establish an independent Department of Revenue, headed by a board or a commissioner, that is accountable directly to the President, is empowered with unbridled authority for issues of tax administration, and is subject to congressional oversight consistent with other provisions of the Commission report.

 

Ernest J. Dronenburg, Jr.