NTA Spring 2025: Danny Werfel (former IRS Commissioner)

Every administration aims to cut taxpayer dollar waste.
Vice President Joe Biden launched a campaign to cut waste in 2012, but it was largely forgotten, unlike more explosive events.
The speaker quarterbacked Biden's 2012 campaign.
Every administration should hunt for misspent dollars to improve efficiency and maintain taxpayer trust.
Waste reduction efforts have predecessors in multiple administrations (Obama, Trump, etc.), going back to Hoover.

Key Question: What is government waste, why does it exist, and how can it be tackled smartly?
The approach to waste reduction often influences how the problem is communicated.

Is waste due to incompetence?
Take Medicare fraud, for example.
Is it because the government just doesn't want to detect it or is there something else going on?
Politicians often claim they can cut hundreds of billions from Medicare/Medicaid, but this wouldn't cover tax cuts.

Can hundreds of billions in fraud error be realistically eliminated, or is it a cost of doing business?
She spent years looking at improper payments error during the formation of the Bush administration's effort.
She shared hard-won lessons because Doge (the current effort) is facing the same issues today.

When payments go out, the government usually doesn't know if they are improper.
To figure out the error, collect more information or take more time to evaluate.

Determining if a payment is proper demands more information about the recipient.
This can be burdensome.
For example, Medicare originally began asking hospitals for paperwork before reimbursements, but they pushed back due to the burden.
An equilibrium is established with some error as part of the process.
Eliminating errors means increasing the administrative burden.

The second way to reduce improper payment is to pause and evaluate more information.
Pausing for review adds more delays to the process.

Medicare has the highest improper payment amount, while EITC has the highest error rate.
An idea to end improper payments in EITC: require parents to swipe their child's ID when they leave the house.
This would track exactly who lived with whom. We won't even need to ask this. We will aggregate exactly who lived with the
This is macro to American values/privacy.
Oklahoma uses this for childcare subsidies, which require parents to swipe in/out daily.
Moving away from comprehensive tracking leads to error and improper payments as a cost of doing business.
Sharing taxpayer information with the SBA to solve improper payments has costs, like data risk and privacy infringement.

The IRS is unique because adding staff decreases the deficit.
Historically, increased enforcement staff didn't count against discretionary tax because it saved taxpayer dollars.
Attacking government waste by reducing IRS enforcement staff doesn't make sense mathematically.

A smaller IRS doesn't mean lower taxes.
It only means that those who don't play by the rules shift the burden to those who do.
Most Americans pay their taxes and play by the rules.
Shrinking the IRS empowers tax cheats to do more.
To be fiscally responsible, we have to prioritize funding for the IRS.
A successful United States relies on paying and collecting taxes effectively.

The current state of the IRS is uncertain; it is like a storm at nighttime with the damage as it is still taking place.
We have to wait for the dawn and for the winds to stop before we can really assess the situation to see how damaged it actually is.
Damage includes a growing tax gap, loss of institutional knowledge, and reduced voluntary compliance, a lagging indicator.
Service levels are also a concern like announcements about workforce reductions.
The explanation claims technology will solve service issues by automating processes.

Modernization is positive if technology works effectively, is safe, secure, and meets taxpayers' needs.
The IRS is responsible for all the things associated with the taxpayer bill of rights.
However, consider the timing of technology implementation versus staff reductions and we need to find out when the technology takes hold before enacting RIF reductions.

People don't understand why government matters.
Civics education should explain the positives and negatives of deregulation or agency elimination.
Civics gaps exist from senators to the media.
Need for a marketing campaign that frames the IRS and tax payment as patriotic in a non-political way.

The Inflation Reduction Act (IRA) funding had two goals:
- Plug immediate gaps.
- Modernize the IRS.
Service levels were low, and staff sizes were at 1970s levels.
Thousands of people were hired to fill walk-in centers, call centers, and submission processing.
Modernization involved technology upgrades, changes to taxpayer accounts, and the launch of Direct File.
The legacy is a decision: destroy the initial progress while building long-term solutions, or build on the spans.

Avoid overcorrection and instead seek a balanced approach.
The Campaign to Cut Waste overcorrected by essentially canceling all conferences.
When rebuilding, don't throw everything out and seek a balanced approach (transition time, respect employees).
Find a middle ground between speed and thoughtful transitions.

IRS, Treasury, and Congress should proactively simplify complicated legislation and say, "This is bloody complicated."
This also requires leadership to say we need to do this.
Winners and losers exist in every tax bill.
The focus is on financial winners and losers, not on simplicity for taxpayers or IRS implementation.
Ongoing complex tax laws and diminishing IRS capacity create tax and service gaps.

Those at the IRS are part of a great company of tremendous individuals, public servants, selfless, smart and talented.
Public servants try to take one step back, and then try to take two steps further than mistakes we made.
We need to find our collective voice to create change as a community of public servants.
Find a diet solution instead of a radical operation. 2019 was not the answer, but we need to reset the values.