How the IRS Was Gutted

An eight-year campaign to slash the agency’s budget has left it understaffed, hamstrung and operating with archaic equipment. The result: billions less to fund the government. That’s good news for corporations and the wealthy.

[Source: ProPublica / The Atlantic]

In the summer of 2008, William Pfeil made a startling discovery: Hundreds of foreign companies that operated in the U.S. weren’t paying U.S. taxes, and his employer, the Internal Revenue Service, had no idea. Under U.S. law, companies that do business in the Gulf of Mexico owe the American government a piece of what they make drilling for oil there or helping those that do. But the vast majority of the foreign companies weren’t paying anything, and taxpaying American companies were upset, arguing that it unfairly allowed the foreign rivals to underbid for contracts.

Pfeil and the IRS started pursuing the non-U.S. entities. Ultimately, he figures he brought in more than $50 million in previously unpaid taxes over the course of about five years. It was an example of how the tax-collecting agency is supposed to work.

But then Congress began regularly reducing the IRS budget. After 43 years with the agency, Pfeil — who had hoped to reach his 50th anniversary — was angry about the “steady decrease in budget and resources” the agency had seen. He retired in 2013 at 68.

Paul Kiel and Jesse Eisinger, writing for ProPublica and The Atlantic, dive in to this fascinating investigation. What they found is alarming.