Almost every large firm or corporation has a person inside the IRS

From Whistleblowers: IRS Officials Behind ‘Fraudulent’ Multi-Billion Dollar Corporate Tax Giveaways by Paul Caron. Who knows whether this is an issue with merit or might merely be a storm in a teacup. It is certainly consonant with the behavior of the IRS in other recent scandals.

Regardless of the merits of the accusation, it is interesting as an example of good intentions gone astray in complex systems, (as virtually all human systems are). I am currently reading Doing Bad by Doing Good by Christopher Coyne which is a pretty rich catalogue of examples and a reasonable explication of why good intentions so often lead to bad outcomes.

The IRS is accused of avoiding bringing big cases against large corporations while at the same time mercilessly pursuing small businesses and private individuals. The reason is ascribed to a well intentioned change in the late 1990's.

[T]he private sector lawyer and ex-IRS attorney explained that since 1998, IRS restructuring has focused on bringing in “outside people.” This led to the employment of an extra layer of executives who were previously “partners from big accounting firms.” Citing active IRS criminal agents, the ex-IRS attorney said: “Almost every large firm or corporation has a person inside the IRS. It’s a revolving door, with the top two or three management layers all from big accounting and law firms, and this is why they won’t work big billion-dollar cases criminally. Private bar attorneys are, in effect, controlling the IRS. It’s a type of corruption – that’s the word used by one IRS agent I’m in touch with whose case was shut down by higher ups without cause.”

I vaguely recollect this issue. I think the intended change was meant to bring more cutting edge talent to theIRS as well as a stronger awareness of real-world accounting and tax issues. The hoped for outcome was better cases against large corporations, more wins, higher yields, and more revenue to the Government. Not a bad argument or intention but in hindsight you can see why the good intention might have led to an unintended and bad outcome.