The Taxman Cometh

PRESIDENT LINCOLN CREATED THE INTERNAL Revenue Service to collect badly needed taxes during the Civil War. Since then, Americans have resented it, as they resent death and foreign films. It has often seemed an arbitrary institution: “judge, jury, and executioner,” in the memorable words of one taxpayer. Businessman Charles O. Rossotti acted as IRS commissioner for five years (1997-2002), and that is a long time by IRS standards. One former commissioner lasted only three months in office; two others endured no more than seven. The butt of endless jokes and the recipient of much hate mail, the IRS commissioner is, by definition, an unhappy man. But Rossotti, a calm and detached character, succeeded where others failed. This is the memoir of a sensible man effecting positive change despite the hysterical and unreasonable demands of politicians, journalists, and whistleblowers of every stripe.

It is important to stress that this is the book of a businessman, for the IRS commissioners before Rossotti had all been tax lawyers, and no one would want to read the memoir of a tax lawyer. Formerly CEO and chairman of the consulting firm American Management Systems, Inc., Rossotti was appointed to run the IRS on the model of a successful 21st-century business. This gives him the mystique of an outsider in these pages, a man on a mission that happens to take place in Washington rather than a careerist eager for headlines. It also gives the book its proper place in the business section of bookstores. Rossotti is here to impart lessons and principles culled from his experience as a successful leader.

What did he accomplish? By most accounts, the IRS before Rossotti’s tenure was in a state of crisis. A Newsweek headline of 1997 powerfully summed up the feelings of many taxpayers: “The IRS has become a rogue organization wielding its awesome power under a cloak of secrecy.” Congressional hearings that same year painted a similarly grim picture, with agency employees and angry taxpayers testifying to poor service, billions wasted on failed computer projects, bad management, unusually cruel treatment of customers, and other problems.

By 2002, the year that Rossotti ended his term, he could look back confidently on five years of work: “The IRS made fundamental changes in the way it did business while continuing to collect $2 trillion per year–all in the glare of extraordinary public scrutiny.” By changes he means improvements. There were many.

Perhaps Rossotti’s main achievement was to transform the culture of the IRS, which previously had been not only adversarial toward taxpayers, but positively Kafkaesque in its manner of visiting nightmares on the wayward and completely innocent alike. Rossotti noted the psychology at work. Since hatred of tax collectors was a common sentiment through the ages (it starts with the Bible), tax experts had developed a hardened sense of their own image: “The agency is not doing its job if it’s not making people unhappy,” one employee stated bluntly.

As the CEO of a highly profitable consulting firm, Rossotti had learned to treat his customers well. He brought this ethic to the IRS, calling taxpayers “customers” and coining a new mission statement for the agency: “Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the law with integrity and fairness for all.”

The idea of serving taxpayers would never have occurred to a tax lawyer, and in hindsight, Congress took a wise gamble in appointing Rossotti as commissioner, for later statistics proved his businesslike method correct. The IRS could collect 95 percent of the government’s revenue without any need for bullying or harassment. It turned out that most people were willing to pay their taxes and were even more compliant when given clear, simple instructions. By 2002, consumer ratings of the IRS had dramatically improved, as taxpayers found their calls answered and their problems given careful attention.

Rossotti’s other main achievement as commissioner was to modernize the structure and technology of the IRS. This was no easy feat, considering that when he first came to the agency he found computer systems dating from the 1960s and ’70s. Worse, he was daily faced with the Washington temptation to “win the headlines”–that is, make bold predictions of progress in order to improve his media image. Never slavish, Rossotti made few promises, but delivered on those he did make, preferring to focus on the agency’s priorities despite the heat of political pressure. In the end, he brought the IRS into the 21st century, helping to ensure modern technology systems and easy Internet tax filing. He also greatly simplified the hieratic and elaborate structure of the IRS, cutting unnecessary management layers and jobs.

If Malcolm Gladwell is your idea of a business guru, and the tipping point your idea of business wisdom, this is not your book. Rossotti is more cautionary than visionary, the George H. Ross to Donald Trump. As he explains early in this memoir, he learned most of his business lessons by watching his parents, Italian immigrants, run a successful imported goods store. The adult Rossotti is likewise a simple man resolutely applying intelligent principles to complex problems. It is a strategy and mindset that brought great change to the IRS and a little bit of relief to America’s taxpayers, even as it continued to bring tax revenue to the government.

Anyone who has gone too far afield in his search for business advice will do well to read this book. And anyone curious for an insider’s view of the IRS might start here.

Stephen Barbara is a writer living in New Jersey.