IRS nominee Koskinen pledges to turn around employee morale, pushes for budget increase

Tuesday - 12/10/2013, 2:02pm EST

John Koskinen, President Barack Obama's pick to lead the embattled Internal Revenue Service, pledged to restore public trust in the agency following the recent uproar over revelations of purported political bias by IRS employees.

Speaking before the Senate Finance Committee Tuesday morning, Koskinen, the former chairman of Freddie Mac, also said he'd work to turn around the agency from the inside out. Among his priorities are dealing with declining employee morale and urging Congress to provide more in annual funding for the agency's operations.

"My experience is that the people in an organization who know most about what is going on are the front-line employees," Koskinen said in his opening statement. "The next commissioner needs to listen to those employees and make sure that they are seen as part of the solution not part of the problem. The IRS is fortunate to have an experienced workforce, committed to the mission of the agency. We need to provide them with the leadership, systems and training to support them in their work."

'The IRS needs a leader'

Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah), chairman and ranking member, respectively, of the Senate Finance Committee, both signaled their support for Koskinen.

"He's the right person to take on this challenge, and with filing season approaching, the IRS needs a leader in place," Baucus said in his opening statement.

Hatch also said he expects Koskinen will be confirmed but said he had wanted the committee to hold off on the hearing until the committee concluded its bipartisan investigation into the claims of politically motivated targeting of some conservative groups for extra tax scrutiny that were first revealed by the agency's inspector general last spring.

Koskinen, who pledged to fully cooperate with the committee's ongoing investigation, said Congress also has a role to play in turning around the agency.

"We need to solve the funding problem facing the IRS," he said.

Lawmakers have downsized the agency's budget in recent years, from about $12.1 billion in 2010 to about $11.2 billion last year.

'Not a recipe for success'

A recent Treasury Inspector General for Tax Administration (TIGTA) report concluded that while the government has saved about $1 billion from cuts to the IRS budget annually, it has led to a loss of $8 billion from compliance-driven revenues, because fewer employees are working to recover taxes that are owed.

At the end of 2012, the IRS claimed about 97,717 employees — a 9 percent reduction from 2010 levels. To deal with the across-the-board budget cuts known as sequestration, the agency has also halted most new hiring, weighing down current staffers' workloads.

"I don't know any organization in my 20 years of experience in the private sector that has said 'I think I'll take my revenue operation and starve it for funds to see how it does,'" Koskinen said in his prepared testimony. "The IRS will have 11,000 fewer people working during this upcoming filing season while processing the largest number of returns in its history. I don't care how efficient you become, that is not a recipe for success or improved compliance and taxpayer service."

The White House has requested about $12.8 billion in congressional appropriations for the agency — a 14 percent increase from last year's levels — in part to handle the agency's expanded responsibilities under the health care law.

Hearing ended abruptly

The IRS has been without a Senate confirmed leader since last year when Douglas Schulman stepped down after serving a full five-year term. Later, the acting director Steven Miller was forced to resign amid the fallout from the targeting scandal.

Obama nominated Koskinen, who helped lead mortgage buyer Freddie Mac through the housing crisis and is known as a Mr. Fix It, in August.

Previously, the longest any nominee for commissioner waited to be confirmed was 100 days, Baucus said. Koskinen's nomination has been pending for 132.

And it will likely stay that way a while longer. Tuesday's hearing was cut short after being twice interrupted by votes on the Senate floor. Republicans, under Senate rules, blocked the hearing from continuing once it neared the two-hour mark. Baucus said the committee would hold another hearing "at the earliest possible time."

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