A Taxing Challenge

When Charles Rossotti, former chairman of Fairfax, Va.-based American Management Systems, took the helm of the IRS late last year, he accepted one of the least enviable jobs in government. The Senate Finance Committee had blasted the agency's management practices and the Clinton administration had reluctantly announced its support for legislation that would completely overhaul the tax agency.

Earlier this year, Rossotti appeared before the Senate committee and shared his ideas about the future of the IRS.

On changing the IRS' approach: The IRS must shift its focus from simply its own internal operations to thinking about how it can do its job from the taxpayer's point of view.

Now, right now today, the IRS does do a rather remarkable job of processing annually 200 million tax returns, collecting with great integrity $1.5 trillion, and providing service to millions of taxpayers. And these capabilities represent a great strength for our country, and we can build on these to make a better agency.

But to meet the public's legitimate expectations in the future, we in the IRS know that we must fundamentally change our agency. A simple way to say it is we have to become problem solvers, not problem creators for taxpayers. Everyone in the IRS should begin to think of themselves as a taxpayer advocate, not simply the people in the Taxpayer Advocate's Office.

On the agency's structure: The heart of the IRS organization is built around 33 districts and 10 service centers. Each of these 43 units, spread around the country, is charged with the mission of administering the entire tax code for every type of taxpayer; large or small, simple or complex.

There are eight intermediate levels of staff and line management between a front-line employee and the deputy commissioner. And the deputy commissioner, if you analyze it, is the only manager besides the commissioner, who has full responsibility for service to any particular taxpayer.

This structure is just too complex and really makes accountability quite weak and very difficult to achieve, despite the best intentions of people to achieve it.

Fortunately, there are solutions to this problem, which are widely used in the private sector. . . . A logical way to organize the IRS is into four units, each of which would be charged with complete end-to-end responsibility for serving a particular group of taxpayers with particular needs.

On hiring issues: I believe that [with the new agency structure] we would be more successful in attracting highly qualified managers, from internal or external sources, with these kinds of management jobs, because they're more comparable to the management jobs that exist in the private sector.

That would enable us to rotate people in from the private sector, which is exactly one of the ideas I have in mind with this. I will say that we will need some of the personnel flexibilities [in pending legislation] in order to make that possible, because it's so difficult to do right now.

And let me say that we're not waiting; we're [looking for private-sector managers] right now. We have a search out with an international search firm to find someone from the private sector to take over the job of the national taxpayer advocate.

On downsizing: If we do this, we can shrink continuously for at least the next four or five years-I don't know about longer than that-we can shrink the size of the IRS in relation to the economy. In other words, we can keep the workforce we have, and the economy can grow, and we will become a smaller fraction year after year.