Irs Accountability A Senate Probe Of The Feared Federal Tax Machine Claims The Agency Uses Coercive Tactics That Place It ‘Above The Law.’

An eight-month Senate investigation of the Internal Revenue Service has found that the tax-collection agency targets mom-and-pop businesses and lower-income taxpayers because they “can’t afford to fight back,” Sen. William Roth, R-Del., said Tuesday.

“It’s not the high revenue that these kinds of audits bring to the Treasury. So why are these Americans audited? Because it’s easy,” said Roth as he opened three days of hearings into practices of the IRS.

Roth, Republican chairman of the Senate Finance Committee, described the IRS as a “troubled agency, one that is losing the confidence of the American people, and one that all too frequently acts as if it were above the law.”

The Senate probe, said Roth, found such IRS practices as a “quota” system that puts pressure on IRS agents to freeze salaries and seize property, “blue-sky assessments” against taxpayers and pressure tactics designed to enlist the help of bosses and family members in collecting taxes from deadbeats.

Roth said IRS agents are issued false identification credentials, purportedly to protect them from assault. But he added: “I’m concerned that it makes them unaccountable.”

Roth said the IRS culture must be changed for the good of taxpayers and the nation. “There is no other agency in this government that directly touches the lives of more Americans. Nor is there any agency which strikes more fear into their hearts,” he said.

Roth and Sen. Daniel P. Moynihan, D-N.Y., pledged a bipartisan examination of the IRS, but it was clear as the hearings opened that Republicans and Democrats have contrasting views of the agency, which collects about $1.5 trillion a year in tax revenue and processes 209 million tax returns.

Republicans tore into the agency.

“We’re all afraid of the IRS. I think every American is,” said Sen. Phil Gramm, R-Texas. Sen. Charles Grassley, R-Iowa, blamed IRS problems on a “management culture mindless of the fact that they are servants of the people.”

Democrats defended the tax collector’s job in American government.

“IRS employees are called upon to do an extremely difficult job,” said Rep. Steny Hoyer, D-Md. “The 102,000 men and women of the IRS who are responsible for collecting 97 percent of the nation’s revenue have one of the most difficult jobs in government. They collect the funds that pay to defend our freedom, educate our children, and take care of our old.”

Added Sen. Robert Kerrey, D-Neb., “The IRS is very efficient compared to the tax collection agencies of other nations.” But he added, “Although law enforcement measures are used to bring in only 3 percent of what is collected, the IRS culture and atmosphere are such that all taxpayers are treated as if they were guilty of something.”

Moynihan said Republicans like to target the IRS because it appeals to potential campaign contributors.

At the Treasury Department, Secretary Robert Rubin declared that it is inevitable that some agents “behave improperly.” The Clinton administration, said Rubin, does “not condone such actions and I have no tolerance for such. I deeply regret any mistreatment of taxpayers.”

But Rubin warned that the Senate hearings could reduce public confidence in the IRS. “We are working hard to reform the IRS, and it would be counterproductive at best, and very harmful at worst, if these hearings undermine morale and damaged our efforts,” Rubin said.

Senators said they shared Rubin’s concern that an attack on the IRS could inspire violence against government agencies.

“Reckless, inflammatory criticism may be good political sport, but it can incite violence among tax protesters,” said Sen. Richard Bryan, D-Nev. “Despite the unpopularity of their duties, IRS employees are public servants who should not be forced to work in hostile circumstances and should certainly not be expected to work under conditions that threaten their health and safety.”

Responding to the Senate report, the IRS denied the existence of a quota system that puts pressure on agents to collect money. IRS spokesman Frank Keith said there has been “a long-standing policy made into law in the 1980s that prohibits use of enforcement statistics to promote or reward employees or their supervisors.”

As for the use of false identities by IRS agents, Keith said, “Assaults on IRS employees, sad to say, are a reality.”

And Keith disputed the Senate’s contention that the IRS disproportionately targets lowerincome taxpayers. He pointed to a new General Accounting office survey showing that among seizure cases completed in 1996, the average tax delinquency was $233,700.

The first witness before the committee, Joseph F. Lane, who represents taxpayers in IRS proceedings, said there have been significant compliance successes. One of the best examples, he said, was in the Central Valley of California. Lane said that the IRS and farm labor contractors have improved compliance “with dramatic results in a relatively short time.

“The best thing about this program is that it has aided the legitimate businesses in the Central Valley who for years have been at a competitive disadvantage when faced with competitors who, by not paying taxes and offering benefits, were able to underbid them.

Lane urged the committee to hold a field hearing in the Fresno area “to permit a first-hand look at this success story.”

MEMO: This sidebar appeared with the story: Collections In 1996, the IRS: Collected $29.8 billion, mostly without taking enforcement action. Levied 750,000 liens against taxpayer property. Completed 10,000 seizures of taxpayer property, with 31 percent involving vehicles, 10.4 percent involving homes, 26 percent other real estate and the rest in miscellaneous categories. Received 9,600 taxpayer complaints over collection practices. Received 11,700 requests from taxpayers for relief from collection activities.