Freezing Taxpayers’ Rights By: Zachary King

Freezing Taxpayers’ Rights 

By: Zachary King 

Introduction

In the weeks since the inauguration of President Donald Trump, the administration has produced a series of executive orders and memoranda implementing executive policy, including several policies that widely diverge from those of Trump’s predecessors. The long-term effects of these policies are yet to be fully known, but two such changes are likely to have detrimental effects on the rights of taxpayers. Either the federal hiring freeze, with its corresponding promise of a plan of long-term attrition in the federal civil service, or the regulatory freeze (commonly known as the “two for one” rule) would likely be enough to cripple the work of the Internal Revenue Service (IRS) in implementing the federal tax laws; in combination, they spell disaster for taxpayer rights.

President Trump’s Freezes

During his campaign for the presidency, Donald Trump released a document outlining a series of promised policies called his “Contract with the American Voter.”[1] The first section of this document contained six points promising to “clean up the corruption and special interest collusion in Washington, DC.”[2] Two of these points having direct impact of the ability of the federal government to perform its constitutional duties and to deliver promised rights to taxpayers, “a hiring freeze on all federal employees to reduce federal workforce through attrition”[3] and “a requirement that for every new federal regulation, two existing regulations must be eliminated,”[4] later came to fruition in the opening days of the administration.[5]

On January 23, President Trump signed a presidential memorandum ordering the implementation of a federal hiring freeze “across the board.”[6] The initial hiring freeze was meant to be a temporary measure in anticipation of a more permanent plan to “reduce the size of the Federal Government’s workforce through attrition.”[7] In the following days, more guidance was released explaining some of the details of the hiring freeze and enumerating several exemptions; there was no general exemption for IRS and revenue enforcement employment.[8] Unions representing federal employees, including those representing many Treasury and Internal Revenue Service employees, reacted strongly to the hiring freeze, both before and after its implementation, expressing concerns that reduction through attrition will result in a loss of expertise.[9]

On the day of President Trump’s inauguration, Reince Priebus, White House Chief of Staff, issued a memorandum freezing nearly all administrative regulation in the federal government, including agency guidance “that sets forth a policy on a statutory, regulatory, or technical issue or an interpretation of a statutory or regulatory issue.”[10]

Later, President Trump signed an executive order requiring “that for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”[11]  The order also generally requires that “new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.”[12] The order contemplates that the Office of Management and Budget will allot agencies an amount of incremental costs (which could be negative), which the agencies may not exceed after netting the respective incremental costs of new and repealed regulations.[13] Within weeks of the executive order’s signing, the Internal Revenue Service halted all but the most routine issuance of guidance, such as the publication of monthly interest rates.[14]

Taxpayer Rights

In addition to the constitutional rights most taxpayers enjoy, such as the due process and equal protection guarantees of the Fifth Amendment, the Internal Revenue Code (Title 26 of the U.S. Code) provides a plethora of statutory protections to taxpayers. While these rights have existed in their statutory form for various, but long, periods, they were not summarized and collated into a document that most taxpayers can actually access and understand until 2014, when the Taxpayer Advocate Service, under National Taxpayer Advocate Nina Olson, released a “Taxpayer Bill of Rights” styled as IRS Publication 1, “Your Rights as a Taxpayer.”[15]

Relevant rights outlined in Publication 1 include the right to “clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence,” the right to “prompt, courteous, and professional assistance in their dealings with the IRS,” the right to challenge an IRS action and “to expect that the IRS will consider their timely objections and documentation promptly and fairly,” and the right to “a fair and impartial administrative appeal of most IRS decisions.”

The rights outlined in Publication 1 are not freestanding. They represent a body of statutory and administrative law, which work together to provide taxpayers with guarantees about their relationship to the government. For example, Professor Saiger argues that statutory delegation of the power to interpret statutes to an agency, combined with the doctrine of judicial deference to agency interpretations, results in an obligation for the agency to faithfully interpret the statute, not simply permission to do so.[16] Moreover, the Internal Revenue Code allows, and even explicitly requires, the Internal Revenue Service to issue interpretive regulations: “[T]he Secretary [of the Treasury] shall prescribe all needful rules and regulations for the enforcement of this title[…]”[17] The IRS also has statutory authority to issue sub-regulatory guidance: “The Secretary [of the Treasury] shall prepare and distribute all the instructions, […] directions, forms, […] and other matters pertaining to the assessment and collection of internal revenue.”[18] These provisions relate to the right in Publication 1 to clear explanations of law and procedures in IRS guidance.

Conclusion

The hiring freeze and regulatory freeze implemented by the Trump White House will greatly diminish the ability of the IRS to deliver on the promises of Publication 1. If the hiring freeze is successful in reducing the size of government agencies like the IRS, what is lost could prove to be experience and talent, as long-tenured employees retire and young, skilled employees are recruited to opportunities in the private sector, with no effective means of replacing them. This reduction in experience and talent will likely lead to a decline in the level of service provided to taxpayers and an increase in the administrative backlog already created by budget cuts and workforce reduction.

Additionally, the regulatory “two for one” freeze is already resulting in an almost complete halt in IRS guidance, guidance that is required for taxpayers to understand and conform to a complex system of taxation. By increasing uncertainty in the area of revenue, both public cost (where regulation does happen, it will have to be the product of intensive, extensive, and otherwise unnecessary evaluation of priorities and effects, well beyond what is contemplated by the Administrative Procedure Act) and private cost (in determining where in the labyrinthine network of tax rumors good planning lies) will likely increase, in direct contradiction to the stated goals of these new policies.

What may perhaps be worse than the negative effects of its actions that the White House has apparently considered and accepted are the consequences they do not intend. In a review of prior government workforce reductions, the General Accounting Office found that some agencies experienced increased costs in addition to decreased efficiency, while the workforce was not actually significantly reduced.[19] While the exact consequences of the Trump White House’s freezes may be uncertain, it does appear that the rights of taxpayers will suffer because of them.

[1] Donald J. Trump Delivers Groundbreaking Contract for the American Voter in Gettysburg, Donald J. Trump for President (Oct. 22, 2016), https://www.donaldjtrump.com/press-releases/donald-j.-trump-delivers-groundbreaking-contract-for-the-american-vote1

[2] Id.

[3] Id.

[4] Id.

[5] As British MP Nigel Evans later noted, President Trump may “go down in history as the only politician roundly condemned for delivering on his promises.” http://www.npr.org/sections/parallels/2017/02/21/516404941/at-u-k-parliament-zingers-fly-in-debate-over-trump-state-visit.

[6] Presidential Memorandum Regarding the Hiring Freeze, The White House (Jan. 23, 2017), https://www.whitehouse.gov/the-press-office/2017/01/23/presidential-memorandum-regarding-hiring-freeze

[7] Id.

[8] See Memorandum: Federal Civilian Hiring Freeze Guidance, The White House (Jan. 31, 2017), https://www.whitehouse.gov/the-press-office/2017/01/31/federal-civilian-hiring-freeze-guidance. See also Memorandum from Mark Sandy, Acting Director, Office of Management and Budget: Immediate Actions and Initial Guidance for Federal Civilian Hiring Freeze, The White House (Jan. 25, 2017), https://www.whitehouse.gov/the-press-office/2017/01/25/omb-memorandum-immediate-actions-and-initial-guidance-federal-civilian.

[9] See, e.g., Hiring Freeze Will Threaten Public Services and Decrease Efficiency, NTEU (Jan. 10, 2017), https://www.nteu.org/media-center/news-releases/2017/01/10/hiring-freeze-will-threaten-public-servi; Hiring Freeze Counterproductive; Will Hurt American People, NTEU (Jan. 23, 2017), https://www.nteu.org/media-center/news-releases/2017/01/23/hiring-freeze-counterproductive; President Trump’s Federal Hiring Freeze Will Cost Taxpayers and Hurt Americans, AFGE Says, AFGE (Jan. 23, 2017), https://www.afge.org/publication/president-trumps-federal-hiring-freeze-will-cost-taxpayers-and-hurt-americans-afge-says/; AFGE President: Veterans are Harmed the Most by Hiring Freeze, AFGE (Jan. 31, 2017), https://www.afge.org/article/afge-president-veterans-are-harmed-the-most-by-hiring-freeze/.

[10] Memorandum for the Heads of Executive Departments and Agencies from Reince Priebus, Assistant to the President and White House Chief of Staff, The White House (Jan. 20, 2017), https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments-and-agencies.

[11] Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs, The White House (Jan. 30, 2017), https://www.whitehouse.gov/the-press-office/2017/01/30/presidential-executive-order-reducing-regulation-and-controlling.

[12] Id.

[13] Id.

[14] Thomas H. Berg, Citing Regulatory Freeze, IRS Stops Issuing Administrative Guidance, Nat’l Law Review (Feb. 15, 2017), http://www.natlawreview.com/article/citing-regulatory-freeze-irs-stops-issuing-administrative-guidance .

[15] IRS Adopts “Taxpayer Bill of Rights;” 10 Provisions to be Highlighted on IRS.gov, in Publication 1, Internal Revenue Service, https://www.irs.gov/uac/newsroom/irs-adopts-taxpayer-bill-of-rights-10-provisions-to-be-highlighted-on-irsgov-in-publication-1. See also IRS Publication 1 (Rev. 12-2014).

[16] Aaron Saiger, Agencies’ Obligation to Interpret the Statute, 69 Vand. L. Rev. 1231, 1272 (2016).

[17] 26 I.R.C. § 7805(a).

[18] 26 I.R.C. § 7805(c).

[19] Report by the Comptroller General of the United States: Recent Government-Wide Hiring Freezes Prove Ineffective in Managing Federal Employment, General Accounting Office, FPCD 82-21 (1982).

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: