Toward an IRS for the twenty-first century - Deputy Treasury Secretary Lawrence Summers

Tax Executive, The, March-April, 1997 by Lawrence Summers

On March 17, 1997, Lawrence Summers, Deputy Secretary of the Treasury, addressed the Midyear Conference of Tax Executives Institute in Washington, D.C. Mr. Summers chose the occasion to present publicly for the first time the Treasury Department's five-point plan to correct problems at the Internal Revenue Service. The text of his remarks follows.

Good morning. Thank you for that kind introduction. It is an honor to be here among tax professionals to discuss the vital question of improving the way in which the IRS collects our nation's taxes.

Nobody likes to pay taxes, but, as Oliver Wendell Holmes once said, they are the price we pay for civilized society. They have been at the center of our nation's greatest debates from Revolutionary times to today. They fund our armed forces, our children's education, and our parents' health care, and they finance advances in science and technology that benefit us all.

Collecting taxes has always posed a difficult challenge. Because of the nature of the work they do, tax collectors will never win popularity contests. Recently, announcements we have made about continuing problems in computer systems have focused attention on the Internal Revenue Service. Continuing improvements in the service provided by banks, brokers, credit card companies, and other users of information technology bring even more sharply into focus the IRS's problems with customer service. At Treasury and the IRS we recognize that the IRS could do much better at providing the kind of cost-effective, high quality service that the American people deserve.

We have, I believe, reached an important turning point. Over the last year, the Treasury Department has focused intense efforts on improving the IRS. The National Commission on Restructuring the IRS, led by Senator Bob Kerrey and Congressman Rob Portman, has already made a significant contribution to the ongoing discussion. A consensus has emerged among a wide group of stakeholders, from business executives to Members of Congress to leaders of the National Treasury Employees Union. The message is clear: it is time for change.

I believe that in the next year or so we have the opportunity and the obligation to bring about the most far-reaching changes in the way the IRS is managed and in the way it does its business in decades. The IRS needs to be more responsive to taxpayers, to use technology more effectively, and to be more efficient. However you feel about structural tax reform, I suspect that most of you share my conviction that for the foreseeable future, the United States will have an income tax that taxes people based on their ability to pay. Given this, it is not possible to eliminate the IRS, and it is vital that we have an IRS that functions effectively. We must all work constructively towards this end. What we must not do is attack the IRS in order to promote other agendas.

It will be the task of management at the IRS to manage information technology better and to harness it toward the goal of better customer service. What I would like to provide today is the Treasury Department's view of how to establish a framework within which the IRS can best get its mission accomplished. I use the phrase "get its mission accomplished" deliberately to underscore the fact that the IRS of the future will have to contract out, outsource, partner with the private sector, and rely on outside vendors to a much greater extent than the IRS of the present.

Last year in testimony before Congress, Secretary Rubin and I recognized that the modernization program was, as we put it at the time, off track. We called for a sharp turn and made clear our determination to bring about change in the way the IRS uses information technology and provides customer service. And there has been change.

We have appointed a new Chief Information Officer at the IRS Art Gross. Following his review of technology projects, we canceled or collapsed 26 programs into nine.

The IRS has increased outsourcing. The percentage of contractors, as opposed to IRS staff, working on tax systems modernization has increased from 40 to 64 percent over the past two years. The number of IRS staff working on tax systems modernization has decreased from 524 to 156. And we expect to pursue a prime contractor for systems modernization and integration and to develop an outsourcing strategy for submissions processing.

The IRS has made progress in eliminating paper. This year, we estimate that 19.2 million Americans will file electronically by telephone or computer, up from 11.8 million taxpayers in 1995.

While there is a long way to go, the IRS has made progress in being able to respond to all incoming calls.

The IRS has improved customer service by beginning to change the internal culture of the IRS. Last summer, President Clinton signed bi-partisan legislation enacting the Second Taxpayer Bill of Rights, which vastly increased our number of taxpayer advocates. After interviewing our head Taxpayer Advocate on NBC'S Today show, Katie Couric proclaimed that Americans have a friend at the IRS.