Originally published by Forbes.com.

Frank Wolpe would like to see the IRS fixed and in his paper A Renewed Call For True Structural Reform To Restore Trust in the Internal Revenue Service provides the beginning of an answer.  In an interview this summer IRS Commissioner John Koskinen said that in his experience in organizational turnarounds the problem is never the people – “It’s the structure, the leadership, the resources..” So Professor Wolpe has some ideas on what went wrong with the structure.  He believes Congress broke the IRS in 1998 with an ill conceived restructuring that came out of hearings highlighting mostly non-existent abuses in the collection process.

Darrell Issa Looking For Victims Not Solutions

Professor Wolpe sees the current set of hearing as having no interest in finding out ways to make the IRS better. Rather the hearings have been a partisan political witch hunt seeking someone to crucify. The belief that the attention to Tea Party exemption applications was politically motivated has become an article of faith, but his experience inside the IRS causes him to believe that it requires an utterly improbable conspiracy. He referred me to the writings of 30 year IRS veteran Steven J. Mopsick who wrote:

In my 30 years of IRS experience in both the National Office and the field, politics and religion were never talked about and were never part of the enforcement mentality. There was also an unspoken recognition of the fact that nothing is secret inside the IRS. Any conspiracy to do anything at all untoward or contrary to the sacred Internal Revenue Manual was not only wrong but nearly impossible to pull off because of the wide spread culture of “dropping a dime” on your co-workers if it deals with something that management might want to know about.

Who knows?  Maybe the next 2,500 “potentially relevant” documents to be unveiled by TIGTA or the 30,000 e-mails rescued from the disaster recovery back-ups will finally produce evidence that the committees can use to blame somebody they find worth blaming.  That will not change the fact that the IRS is broken in many other ways and the importance of fixing it. As Steven Mopsick wrote:

In today’s world it seems, sometimes the best we can expect from government is to just keep things from getting worse. But when it comes to collecting enough money to keep the lights on and protect our shores from lunatics who wish we were dead, we better get it right.

The Reorganization

Prior to the reorganization the IRS was organized into 33 geographic districts, each headed by a district director who typically had extensive field experience.  This structure was replaced with a “stove pipe” structure.  The effect of the structure is to have people reporting to management in far away offices, often in Washington.  The stove pipe means that information only goes up and down with no local coordination.  Also it has also been considered not so necessary for senior executives to have any field experience or knowledge of tax administration.  Case in point is one Lois Lerner, who came from the Federal Election Commission and based on her priorities thought that she was still working at FEC while head of the IRS Exempt Division.

Frank Wolpe  is Professor Emeritus in Law, Taxation and Financial Planning at Bentley University.  Bentley, located in Waltham Mass, has educated many of New England’s accountants so Professor Wolpe and I have a lot of acquaintances in common.  Professor Wolpe started Bentley’s Masters in Taxation program.  It was an innovation, much copied, to have an MST program at a business school.  Prior to Bentley he had worked for the IRS for eight years after some time in the Army where he reached the rank of Major.

He noted that the old District organization was very much like a military organization with a chain of command and in-touch hands on leadership. He likened the switch to the stove-pipe model to trying to win World War II, but keeping all high ranking officers in Washington and not sending anybody over captain overseas. Professor Wolpe indicated that fixing the largely non-existent problems identified in 1998 by scrapping the districts was like bombing the wrong country.

Scandal Came From Structure Not Conspiracy

Professor Wolpe believes that America’s history of distaste for taxation beginning with the Boston Tea Party make it so that the IRS will never be loved. We do need it to be “to be universally respected for its sense of fair play, independence and competence”. Most tax is collected because people believe that compliance is both right and wise. If the IRS becomes toothless and erratic, more and more people who currently comply will start feeling like suckers. As noted Professor Wolpe attributes the current loss of confidence not to conspiracy but to structure

The Service has been run with a silo/stovepipe organizational structure since 1998, but notably never before. Inside those top-to-bottom stovepipes, there are field workers at the bottom, like those in the now notorious Cincinnati Tax Exempt stovepipe, so recent quick-shooting naysayers unsurprisingly see them as part of an elaborate political conspiracy from Washington, DC to Cincinnati. But, they have no evidence; and for that reason alone, cynically criticizing workforce integrity and falsely blaming a White House so obviously uninvolved in day-to-day Internal Revenue Service matters, is just wrong. With less blame and more facts, even critics might see that the entire Cincinnati episode just demonstrates how otherwise good field workers can trip-up inside overstretched and isolating stovepipes. In fact, since the highly praised 1952 first-ever Service reorganization by the Truman Administration, the unbending practice of Service field employees, managers and senior-executives has been to scrupulously prevent any misconduct, especially political targeting. Nevertheless, this aversion to anything biased seems to have recently backfired for one reason – a bad structure, not bad workers!

The Way Forward Is The Way Back

Professor Wolpe argues that bringing back the district organization and recruiting IRS executive leadership from people with field experience is the way to restore trust and effectiveness to the IRS.

 An action plan to implement this aspirational and streamlined on-site oversight structure would work well for at least five reasons. It would: (1)Deliver uniform-national taxpayer treatment, less remotely-supervised, with a corps of field-based and technically field-seasoned “grass roots” senior executives (embedded closer to the customers served); (2)Minimize management and judgment failures with closer more-effective onsite accountability, consistent with a reinvigorated service-oriented mission; (3)Remove structural and behavioral stovepipe barriers while getting rid of their top-heavy common-function duplicative costs; (4)Assure improved, barrier free, internal and external communications; and (5)Reinvent a management development program that embraces a growing corps of field senior-executives whose maturing experience and judgment has been enriched by inter-disciplinary training across functions.

Professor Wolpe recommends that the national office be shrunk to put management into closer touch with operations.

Will Congress Rise To The Challenge?

IRS veteran Stephen Mopsick in his review of Professor Wolpe’s paper observes:

Professor Wolpe has laid down a gauntlet for IRS reform and it remains to be seen whether Washington has the guts to take it on.

It is every American’s birthright to be skeptical of the tax man, but the lack of respect for the IRS presently is not a situation which should be tolerated much longer.

Unfortunately it may well be that it would suit the purposes of some for the IRS to stay broken.  Catherine Rampell in a piece for the Washington Post title Stop starving the beast of the IRS wrote:

But then, for many conservatives, bureaucratic incompetence may be a feature of IRS budget cuts rather than a bug . After all, one effective way to convince Americans that the government deserves to be shrunk and defunded is by making it grossly dysfunctional through inadequate appropriations. Budget cuts beget distrust in government, which begets more budget cuts.

I’m starting to fear that this is not going to end well.