The IRS, its glory days and its checkered past

WASHINGTON (AP) ? For a time, the Internal Revenue Service inspired awe and admiration in Americans, not just trepidation and lame jokes about death and taxes.

Everyone loved the revenue agents when they put away Al Capone, the Chicago underworld's master of brutality and bribes, in a coup so spectacular it scared other gangsters straight.

In the year after, federal coffers swelled as delinquent taxpayers stepped forward to make good on their debts. Criminals came out of the woodwork to pay taxes on their ill-gotten gains. Authorities in what was then the Intelligence Unit of the Bureau of Internal Revenue nailed the slippery Public Enemy No. 1 when no one else could, scooped up New York City racketeers by the dozen and stood tall in the popular imagination as incorruptible, fearless stewards of the treasury and the law.

Fine, but that was the 1930s. What have they done for us lately?

Or to us?

The essential mission hasn't changed. The IRS still collects the money that goes back out to build roads, help look after people in their old age, fight menaces from Nazism to terrorism, and operate the vast levers of government. It still locks up a few thousand delinquents a year, among them drug kingpins who wouldn't be caught any other way.

But no one loves the IRS anymore, not for ages. It's our culture's king-sized pain that makes you do hard math, issues nonsensical directions, takes your money and gives it to politicians to waste even as they borrow unspeakable sums from China to waste even more.

On top of that overdrawn caricature, the agency now is saddled with its episode of tea party tumult, exposing IRS behavior that is memorably bumbling at best and criminal at worst.

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"Taxes grow without rain." Proverb.

More than 97,000 people work for the IRS, more than double the workforce of that other deeply inquisitive and all-seeing institution, Google.

That includes 13,000 revenue agents and more than 1,500 lawyers, about as many attorneys as practice statewide in North Dakota. It's bigger than some Cabinet departments ? Transportation for one. Employment has dropped by about 10,000 since 2010.

The perception of the "taxman" probably should give way to tax woman because more than six in 10 employees are female, a substantially higher share than in both the civil service and U.S. labor force at large.

The IRS is something of a hybrid in its relationship with political masters, not the "independent agency" claimed by President Barack Obama when he dissociated himself from its discriminatory audits of conservative groups seeking tax-exempt status during the 2012 campaign.

It is partially independent, which is not at all like being a bit pregnant. On one hand, the president and his people at the White House are barred by law from pressing the IRS to start or stop a tax audit. This is to prevent the president from putting the heat on a political foe or going easy on a political friend, both tactics of the past.

The commissioner serves five-year terms, ensuring that leadership is out of synch with four-year election cycles. The commissioner and chief lawyer are the only political appointees and must be confirmed by the Senate.

But the commissioner reports to the treasury secretary through the department's deputy and can be fired at will by the president, which is not the case in more hands-off federal bodies. Indeed, the acting chief, Steven Miller, was ousted within days of the report coming to light showing the misbegotten actions of lower level employees; he was one of three senior officials to be sidelined in the continuing investigation.

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"This is too difficult for a mathematician. It takes a philosopher." Nobel Prize physicist Albert Einstein on preparing his taxes.

The income tax was unloved from its inception.

Pushing for it in 1861 to help pay for the Civil War, Rep. Thaddeus Stevens declared, "It is unpleasant to send the tax gatherer to the door of the farmers, the mechanics, and the capitalists ... but these things must come or this government must soon be buried in its grave."

President Abraham Lincoln signed into law a 3 percent tax on income over $800, a sum few people made. A progressive income tax followed a year later in a law establishing an enforcement arm, the office of commissioner of internal revenue in the Treasury Department. The wealthiest Americans paid 5 percent.

Before the end of the 1800s, the income tax was repealed, revived and struck down as unconstitutional, only to return in 1913 with the enactment of a constitutional amendment.

The tax form of 100 years ago ? three pages long, with another page of instructions ? loosely resembles the short form of today, except for its provisions for deducting uninsured shipwrecks and its guidance to a still-agricultural nation about claiming income from the wool and hides of slaughtered animals.

The basic tax rate was 1 percent on personal income over $3,000, and there was a 6 percent surtax on astronomical incomes over $500,000.

Rates would not remain so benign for long. In 1918, the top rate soared to 77 percent to help pay for World War I. During World War II, compliance leaped forward when Congress introduced payroll withholding and quarterly tax payments.

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"If you drive a car, I'll tax the street. If you try to sit, I'll tax your seat. If you get too cold, I'll tax the heat. If you take a walk, I'll tax your feet." The Beatles, "Taxman."

Back to biblical times, revenue collection was often contracted out to independent "tax farmers" so as to insulate authorities from the howls of an aggrieved population, Atlanta accountant Jay Starkman says in his history of taxes, "The Sex of a Hippopotamus," so named because it's about as hard to divine whether a hippo is male or female as it is to comprehend the tax code.

A certain distance remains. No president visited the IRS headquarters until John Kennedy did so in 1961, embracing the tax collector as the underpinning of a nation locked in Cold War competition, a space race and monumental obligations at home and abroad. "We are strongly behind you," Kennedy told the agency. "We expect the best from you."

It was a historic, morale-building visit to the put-upon agency but JFK's record with the IRS is not entirely noble. Although the bureau was reorganized in the 1950s to replace patronage appointments with career professionals (and to rename it the Internal Revenue Service), Kennedy's administration used it to try to cower critics on the right.

Later, President Richard Nixon's IRS manipulations against those on his "enemies list" rose to the level of an impeachable offense in the eyes of the Senate Judiciary Committee.

In the 1990s, the IRS went through another overhaul, this time to introduce more accountability, more recourse for the taxpayer and a customer-service ethic.

"Some people believe that the IRS slogan is, 'We're not happy until you're not happy,'" Starkman writes in his book. Yet it's probably more responsive to the consumer than the annoying help lines for digital gadgets. "Although IRS is the largest paper-shuffling organization in the world," he says, "when I call, I still get a live American person fairly quickly."

To IRS haters, the overhaul was not much more than public relations gloss, lipstick on a fanged pig.

But it made some changes that are consequential to this day. Among them, it established the Office of the Inspector General for Tax Administration, a more autonomous organization than existed before to scrutinize the behavior of the tax collectors.

That's the outfit that investigated and exposed the audits slanted against conservatives in the 2012 campaign. It's why the IRS is in such a pickle now.

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Associated Press researcher Monika Mathur contributed to this report.

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Online:

The IRS and Al Capone: http://tinyurl.com/k39dhr7

Source: http://news.yahoo.com/irs-glory-days-checkered-past-131427658.html

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