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Reforming the Internal Revenue Service: A Comparative History

Four times over the last 139 years, American political leaders have tried to revamp the Internal Revenue Service (IRS). Established in 1862 as the Bureau of Internal Revenue (BIR or Bureau), the agency has been renamed, restructured, and rebuilt repeatedly. Only during four periods, however, has the IRS found itself at the center of a powerful, committed reform drive: 1866-1870, 1920-1926, 1952-1954, and 1997-1998. Of these four periods, only the last two produced substantial change, reconstructing the agency's administrative structure. All four periods, however, shared three key dynamics. First, each revolved around a familiar litany of complaints; critics have repeatedly charged the agency with corruption, favoritism, secrecy, and taxpayer mistreatment. Second, reform periods have arisen during times of declining support for progressive taxation; the income tax and the IRS, both products of the Civil War, have grown up together, their political histories broadly parallel. Third, reform grows out of administrative failure; during the first three periods, wartime changes in the tax system threw the spotlight on collection problems, while the restructuring in the 1990s grew out of expensive failures in the modernization of IRS systems.