Originally published on Forbes.com June 6th, 2013
Here I go defending the IRS again. Everybody is on them about the stupid conference with the line dancing video that cost four million dollars. Granted that one is particularly egregious. It sucked up almost 10 % of the IRS spending on conferences for three years. The fact is that I hate conferences where a lot of money is spent, but there must be somebody who likes them, because there are so darn many of them.
Does The IRS Spend a Lot On Conferences ?
Well of course they do. They must also spend a lot on pens and paper and computers. It would make me slightly crazy to have overall fiscal oversight of a large organization, because I am kind of a cheapskate. If somebody said it would be a great morale booster to give everybody a $25 gift card for Christmas, I would be, like – OMG that’s $2.5 million dollars. To have perspective on the total number, you have to divide by the number of employees. $50,000,000 is a big number. When you divide it by 100,000 (I’m rounding the number 97,117 up to make the math easier), you get $500. That’s for three years. Let’s be sloppy and call it $200 per year per employee.
Does Everybody Who Works For The IRS Go To Conferences ?
Frankly, I don’t know how to figure that one out. If it is only half of them, that would get the annual per employee cost up to $400 per year. If it is 25% that would make it $800 per year. Is that a lot ?
The Brain Drain
It is pretty difficult to shock me, but there is this little tale that somebody, who has good cause to know about such things, told me that shocked me. In certain circles, I am reputed to be pretty good at partnership taxation, which can be on the arcane side. I am good enough to have at least glimpsed the most ethereal levels of the field. I had absolutely nothing to do with it, but it was arcane theories of partnership taxation that fueled what Jack Townsend calls the “raid on the fisc” in the nineties and the turn of the millennium. That was the era of Son-of-Boss and other offenses against double entry. Whether Romney had done a Son-of-Boss deal was one of the mysteries never unveiled about his returns.
The people charged with sorting out such skulduggery work for the Chief Counsel of the IRS. Here is the thing that I heard that shocked me. When a relative rookie at the chief counsel office(Say somebody with a couple of years on the job) has a knotty problem, he is inclined to bounce it off his old boss. Does he walk down the hall ? No. He has to call her up. He has to call her up because she works at a Big 4 firm. Probably the place where he wants to work in a couple of years. So there will not be anything in his final conclusion that will anger his once and future boss. Essentially the chicken coop is being guarded by the future foxes.
In a perfect world, the smartest most motivated tax professionals would be working for the IRS. In a democratic capitalistic country there are institutional barriers to that happening. Still Congress has to remember that the IRS has to draw from the same labor pool as the people who are trying to figure out how to minimize tax liabilities. The latter will always be able to make more money on average as long as Congress keeps things complicated. Actively trying to demoralize the IRS employees to score political points rubs salt into the wound.
How Much Do Tax Professionals Spend On Conferences ?
I worked in public accounting mostly focused on tax for not quite 34 years. I only was hired once, but I have worked at every size firm from large local to not quite Big 4. When I was staff at Joseph B. Cohan and Associates, I didn’t go to many conferences, but I was promised that someday I would be able to go to the NYU Institute On Federal Taxation. I think that was the only time that Herb Cohan was exposed to original source material. He would reel off what he had absorbed there in about ten minutes at our tax season kick-off meeting after telling us we were the best crew he ever had. All those years of continuous improvement made me wonder what it must have been like at JBC in 1950.
I don’t know if Herb Cohan is still going to the Institute. I understand that he went enough years so that now it is free for him, so he may not be able to resist. I don’t know exactly what it will cost you for 2013, but here is some information for 2012. Tuition for the full six days is $2,080. There was a group rate on the hotel room, so that will “only” cost $2,583 before you add the room tax. Then there is getting to Manhattan. From where I live it means a couple of hundred for the train or close to that to park the car. You can actually eat pretty cheap in Manhattan what with pizza by the slice and hot dogs, but a normal person would probably lay out at least another couple of hundred.
So there you have partners in a large local springing for five grand.
I ended my career with the not quite Big 4. There were two conferences a year, I had to attend. I actually don’t know what they cost, but I have to tell you it is a lot more than I would have been willing to spend. It had to be pushing two grand just to fly, feed and house me. I probably could have gotten another one approved if I had cared to. So the conference cost for a ho-hum not quite partner in the not quite Big 4 is about six grand or so.
Personally, I think conferences are a waste, but obviously people who are much smarter than I think differently. The most outrageous, most egregious out of control spending conference put on by the IRS was the one in Anaheim that cost 4.1 million. It was for managers in SB/SE. The number attending was 2,609. That works out to $1,571 per attendee, which is kind of ridiculous, but by that standard so is just about every conference that non-government tax professionals attend.
The Real Problem
By the standard of the rest of the tax profession, the IRS does not seem to spend much on conferences. That one outrageous outlier raised the average significantly. What motivated it was a common phenomenon in just about any bureaucracy that works on an annual budget. My 19 year old brother explained it to me when I was eight, There was period of time when they served steak and eggs for breakfast to the men on the USS Randolph as they prowled the seas chasing Russian submarines and recovering Mercury astronauts. That would be the end of the federal fiscal year. I saw the same thing when I was on the Town of Sutton Finance Committee. The outrageous Anaheim conference was in August. The federal fiscal year ends September 30. People at the IRS are government bureaucrats and act like government bureaucrats. Shocking.
There is an ideology that holds that we would be better off with a much smaller federal government which would not need nearly as much tax revenue. I have a lot of respect for that ideology and I think it deserves a fair hearing. I think, though, that it is underhanded to devote energy to defeating taxation by gutting enforcement and demoralizing the enforcers. And that is what I see going on.
You can follow me on twitter @peterreillycpa.