Save the IRS!
Dominic Green
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The history of government is the story of bureaucracy. From temples, grain stores, and cuneiform tablets to ministries, standing armies, and the IRS website, the grasp of a government has been shaped by the reach of its bureaucracy. Any change in the nature of the bureaucracy will alter the capacity of the government. This will then alter the relationship between the government and its subjects and, if the bureaucratic changes and their effects are significant enough, the form of government and the nature of society.
“War made the state, and the state made war” was historian Charles Tilly’s summary of how and why the modern nation-state emerged in Western Europe. To project military force beyond your borders, and even keep the peace within your borders, you need an effective civilian bureaucracy. There can be no armies or police forces without centralized taxation, only warlords and levies. The monopoly on force can be asserted through claims of legitimacy, but it is created through bureaucratic capacity. Conversely, a failure of bureaucratic capacity undermines the legitimacy of the state.
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We are now in the early stages of a new chapter in the story of bureaucracy: digitization. Our social and economic lives are already digitized, but the government is where the unstoppable force of technological development meets that immovable object, the bureaucrat with a job for life. Meanwhile, the Estonians already have the world’s first “digital society.”
All of Estonia’s public services are available online. Almost all taxpayers file and pay online, and the country’s public health data are fully digitized. It is a criminal offense to obtain a person’s private health data without permission.
Estonians have been voting online (i-voting) since 2005. No one has claimed the electoral software has been hacked or the elections stolen. The Estonians’ open-source data platform, X-Road, has no centralized database. It runs on a network of servers linked by encrypted pathways using blockchain. This system has been adopted by the U.S. Department of Defense but not by any of our civilian bureaucracies. Decline is a choice.
If taxation is the beating heart of bureaucracy, the IRS is a clogged artery. COVID-19 exposed the federal bureaucracy as a failed state. Nowhere is the failure more obvious than in the IRS’s performance. The IRS processes more than 150 million business and personal returns every tax season. By the end of 2021, the Government Accountability Office reported, the IRS had a backlog of 10.5 million paper returns and returns stopped for errors and queries and a backlog of 5 million pieces of taxpayer correspondence.
To clear the correspondence backlog, the IRS stopped answering the phone. It obtained a “short-term authority” to hire more staff but did not start hiring “until a month after the filing season began.” The GOA noted that it had “previously made 13 recommendations to the IRS and the Department of the Treasury, as well as three recommendations to Congress” for improving returns processing and customer service. The IRS failed to implement any of them. It did, however, ask for more money.
In January of this year, Erin M. Collins, the national taxpayer advocate, issued an annual report to Congress on the IRS’s 2022 performance. The IRS, Collins wrote, “failed to meet its responsibility to pay timely refunds to millions of taxpayers for the third year in a row.” Some 13 million taxpayers had kept up their end of the bargain, filing paper returns on time, but “paper processing delays” delayed refunds “generally by six months or longer.” Millions of electronically filed individual returns were “suspended” because they “tripped IRS processing filters and required manual review by IRS employees.” Hundreds of thousands of returns claiming employee retention tax credit were delayed.
In 2019, 29% of phone calls were answered by a live customer service representative, or CSR. In 2021, that figure was 11%. The IRS took on 4,000 CSRs to answer the phones in 2022, but the percentage of calls answered by a live human only rose from 11% to 13%. The percentage of calls answered by “automated assistance” actually fell from 27% in 2019 to 8% in 2023.
In an age of universal digitization and automation, the IRS is not just failing to keep up. It is actively falling behind. We are a quarter of the way through the 21st century, but the IRS is stuck in the late 20th century. The Biden administration’s response is to throw more money into processing paper returns instead of completing the transition to an entirely digital system.
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Similar signs of decay are evident across the federal bureaucracies.
It is a commonplace that empires fall from within. When we try to explain their decay, the eye is drawn to visible phenomena: decadence and plague, for example, or the collapse of border control. But the slowing and eventual paralysis of bureaucracy is, like hypertension, a silent killer. Like all sane people, I dislike paying taxes. But the consequences of bureaucratic failure will be worse. So it is with a heavy heart, and considerable surprise, that I find myself issuing a clarion cry that will preserve the American way of life. Save the IRS!