Keep the White House away from the IRS

Keep the White House away from the IRS
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There is a move afoot to give the White House a formal role in the promulgation of tax regulations which for decades have been written and issued by the IRS and the Department of the Treasury without coordination with or review by the Office of Management and Budget (OMB).

Each of us has worked as a staff member in the Executive Office of the President and held senior tax positions at the Treasury, under both political parties. We both agree that placing OMB in charge of interpreting the tax code is a bad idea. 

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During the Reagan administration, OMB and the Treasury Department executed a formal agreement exempting most, but not all, tax regulations from the OMB review process followed by most other departments and agencies.

 

This agreement has governed the approach to tax regulations through five administrations, Republican and Democratic alike. The IRS/Treasury rule-making process is painstaking and evidences a constructive tension between the tax administration experts at the IRS and the tax policy professionals at the Treasury.

Moreover, this process is accepted and understood by taxpayers and tax practitioners, who know they have several avenues to participate in the process and potentially influence the outcome. For the majority of tax regulations, taxpayers and practitioners welcome the guidance because it provides needed clarity for an ever-more complex tax code. There is no public clamoring for change to the current system.

The case for revisiting the existing arrangement rests on the presumption that tax regulations are similar in nature to those promulgated by most other agencies and that the regulations themselves create economic burden.

The drafters, for example, of environmental or workplace safety regulations are seen as balancing agency-driven policy goals against the cost of compliance imposed on affected parties. In contrast, tax regulations are generally explanations of how a statute applies to particular transactions or specific entities as contemplated by the statute.

In effect, the economic burden for most provisions is reflected in the congressional revenue estimates that accompany the statute, and this economic burden is not significantly modified by the interpretive guidance or regulation. 

On a practical level, OMB does not possess the requisite expertise to add value to the development of the vast majority of tax regulations. Insertion of an OMB-led review process will, at a minimum, slow things down to the detriment of taxpayers wanting certainty about how to comply with the law.

It is also important to note that as a part of the Executive Office of the President, OMB is inherently more political than the Treasury. Throwing OMB into the mix could lead to political influence on what is traditionally a technical exercise.

Thinking back just five years to Republican allegations that the IRS had gotten too close to the White House, it is surprising that the Trump administration — with the support of some in Congress — is considering increasing formal linkages between the IRS and the White House.

Exercising greater White House control over the IRS regulatory process will lead to nothing but problems.

Mark W. Everson is the vice chairman of alliantgroup. Everson served in the administrations of Ronald Reagan and George W. Bush. He was commissioner of Internal Revenue from 2003 to 2007. Mark J. Mazur is the director of the Urban-Brookings Tax Policy Center. Mazur served in the Clinton and Obama administrations. He was assistant secretary for tax policy from 2012 to 2017.