David Burnham
David Burnham

Fellowship Title:


David Burnham
November 8, 1987

Fellowship Year

About a year ago, a middle level official in the Internal Revenue Service named Wilbur E. McKean sent a pointed one page memorandum to the six group managers under his immediate command.

McKean, the man in charge of the Baltimore District’s Field Branch II, was not happy with his managers. “I am sure each of You has analyzed and evaluated the January report for your group,” he wrote. “Personally, for a five week period, it is a sorry report. Not one manager has come forward to explain the poor performance statistical indicators.”

McKean was talking numbers, numbers of seizures that had been performed, numbers of investigations closed, numbers of criminal tax matters that had been uncovered. And he wanted production. During the January reporting period, he said, the 91 revenue officers and staff assigned to Field Branch II had made only seven seizures and referred only one case to Criminal Investigating Division.

“It appears the fewer cases that the revenue officers have assigned to them, the less work they do,” McKean told the six supervisors. “Where are you as managers? What are you doing and is it effective? The revenue officers that are performing above a satisfactory level will be rewarded, and the ones that are not will be documented with corrective action taken. You will be evaluated on your accomplishments or lack of accomplishments. Need I say more?”

There was no need for McKean to say more. Once again the public had been provided a glimpse of the elaborate quota systems that dominate the lives of many of the 102,000 men and women who work for the federal government’s most powerful civilian agency.

Because production quotas are such a common part of modern industrial life, they have become largely invisible. After all, almost all of us work at jobs where our bosses have set either explicit or implicit numerical goals. During my own career, for example, I worked for United Press International. Newsweek and The New York Times. At each of these institutions, there was a clear understanding, among reporters about the number of stories the editors expected them to write: two or three stories a day at UPI, two or three stories a week at the Times. (There were individual variations. It was understood, for example, that while Seymour Hersh might write only one dynamite story a month, that the reporters assigned to the Times’ handout-filled financial section should turn in one story a day.)

But the polite production expectations felt by most reporters, the pressures placed on all telephone operators and the unbending demands imposed on the auto workers running the Chevrolet assembly line are substantially different than the quotas at the IRS. The various work requirements of the newspaper, the telephone company and Chevrolet, after all, arc mostly aimed at assuring the managers that a sufficient number of widgets will be produced each week. Although sometimes brutal, the immediate impact of the requirements is limited mostly to the people who work for these institutions.

IRS quota systems, however, trigger the enforcement actions of a gigantic agency as it attempts to persuade over 100 million taxpayers to live up to the mandate of a confusing and ambiguous tax law.

Here an analogy is helpful. Many police departments establish quota systems requiring their officers to hand out so many tickets a week or to make so many arrests each month. Almost always, the police quota systems are aimed at law enforcement problems where there are no immediate victims. These problems usually center on society’s attempt to control narcotics, prostitution, gambling, and traffic.

The quota systems utilized by most state and local police departments create many unintended and harmful effects. For the public, of course, the most obvious problem is the arbitrary enforcement sometimes engendered by the quotas.

The genuinely hurtful impact of quotas jumped to the front pages recently after two New York Times reporters obtained a copy of an internal police report charging that four officers had made more than 100 improper or false arrests. The victims usually were black or Hispanic men. The report said the motive for the false arrests was a formal police scoring system that promised choice assignments to those officers making the most arrests.

Sydney C. Cooper, a distinguished former commander in the New York City Police Department, remembers when he was the precinct captain in the Sheepshead Bay section of Brooklyn. “There was pressure from headquarters to cut down on traffic accidents so we passed on the word from Centre Street that each cop in the precinct was going to have to write so many moving violation tickets a month. What happened, of course, was that once a month those jokers would remember the chart and go out and knock off the first ten cars that didn’t come to a complete and total halt at an obscure stop sign in the precinct. I am sure that at least some of these drivers understood the tickets were not kosher and were understandably offended.”

Cooper added, however. that quotas have another seriously negative impact: they tend to lead the police in the wrong direction. The police goal is not to hand out so many speeding or parking tickets each month, it is to assure the safe flow of city traffic. The reason why police headquarters had demanded more tickets for moving violations, Cooper said, was that there had a sudden increase in traffic fatalities in the area. “We eventually took a careful look at these fatals and discovered that most of them were happening at 3 in the morning on a major highway that ran through the precinct. The early morning stop sign tickets were irrelevant.”

In some instances, law enforcement quotas encourage corruption. In New York City during the 1960’s, Police Commissioner Howard Leary laid down the rule that every narcotic division detective had to make a certain number of felony arrests a month if he wanted to keep his highly valued position. As established by the Knapp Commission investigation a few years later, the rigid quota requirement may have been one of the perverse pressures that pushed virtually every narcotics detective in New York City into establishing corrupt relations with drug addicts who could provide them useful leads.

The felony arrest quota established by Leary was not an impossible goal for the narcotic detectives. But an element of uncertainty had been introduced into the game because the Department was extremely stingy with “buy money,” the funds used to purchase heroin from the dealers so the dealers then could be arrested for dealing. To reduce the uncertainties, many detectives developed secret stashes of heroin by stealing it from street addicts. The detectives would then pass the stolen heroin to other addicts in return for tips that would help them make the required number of “felony collars.” In the end, the arrest quotas. combined with poor training and very little supervision, led to a situation where the Narcotics Division actually may have became one of the major distributors of heroin in New York City.

Cooper said that despite these gigantic problems that quotas are an essential management tool. “Given the lack of direct supervision inherent in police work, how else can you make sure that everyone is pulling their load?” he asked. But he added that without very thoughtful application, quota systems frequently turn into monsters that lead to abusive, unfair and ineffective police work.

Many of the difficult management problems that confront the police executives also face the field managers of the IRS. Both the traffic cop and the IRS Revenue officer have been ordered to undertake the difficult job of enforcing unpopular laws in situations where there are no immediate and obvious victims who have called for assistance. Because cops and revenue officers are not automatons, they naturally lean toward postponing the often difficult moment when they stop a speeding motorist or seize the assets of a delinquent tax payer. To counter this natural reluctance, the managers fall back on establishing the quota systems that produce the acts of mindlessly arbitrary law enforcement that so enrage the public.

As in the case of the New York Police Department, quotas often lead the IRS in the wrong direction. The IRS goal is not to make ten jillion seizures a month, the aim is to encourage citizens to pay their taxes.

Wilbur McKean’s February memo about how he intended to use production statistics to evaluate the supervisors who worked for him was made public this summer by Senator David Pryor. Pryor, an Arkansas Democrat who heads the Senate Finance Oversight Subcommittee, disclosed the McKean memo during a series of hearings designed to build support for his legislation to devise a taxpayer’s bill of rights.

But the McKean memo was not the only evidence the subcommittee turned up during its investigation of quotas in the IRS. John Pepping, a Revenue Officer from Los Angeles, told the subcommittee about a sign that recently was taped on a supervisor’s door. “Seizure Fever–Catch It,” the sign read. More interesting in a way, Pepping also testified that agents with the week’s best performance records in terms of seizures and other aggressive techniques were awarded with extra leave time.

Another witness was Robert M. Tobias, the president of the union that represents many of the IRS’s 102,000 employees. “Most, if not all of the seemingly irrational IRS actions with regard to taxpayers–especially the unwarranted seizures and levies–are traceable directly to production pressures and the ethos of statistics worship fostered by the IRS management,” he said.

Denying The Evidence

Despite the clear evidence of the McKean memo, the testimony and other evidence obtained by the subcommittee, the agency denied all. “The IRS forbids the use of enforcement statistics to rate the performance of its managers or employees. It is clear the memo that was released today by the subcommittee is in violation of this policy. We feel the branch chief misunderstood the guidelines.”

IRS Commissioner Lawrence Gibbs made a more general denial. “I would like to note here that enforcement personnel are not evaluated on a quota system. In fact, we have a policy statement, P-1-20, which states that tax enforcement results tabulations shall not be used to evaluate such personnel or to impose any production quotas or goals.”

The absurd quality of the IRS denials was reinforced by a table of enforcement statistics that Pryor Subcommittee has in its files. The printed table calculates the enforcement activities for every one of the sixteen groups in the collection division of the Baltimore District. For each group, the chart displays the number of tax delinquency accounts that have been assigned, the number of tax delinquency investigations that have been closed and the number of levies, liens and seizures that have been accomplished. There also is a column showing the cumulative number of cases that each group has referred to the IRS’s criminal investigating division.

Evidence that the IRS is a quota driven agency go back a long long way. So do the official denials. More than six decades ago, on March 14, 1924, the Select Senate Committee on the Investigation of the Bureau of Internal Revenue was questioning C. R. Nash, the assistant to the commissioner. “I frequently hear the rumor that agents and other men are rated on the amount of additional tax they turn up. In other words, that their promotion depends upon finding error in favor of the government.”

Nash responded in the same world weary tone that would be adopted by unborn generations of pained IRS officials. “I believe that a few years ago there was some system–or I would not say there was a system, but the efficiency of the revenue agent was rated to some extent on the amount of additional tax he reported.” he said. “That policy has been discarded and today a revenue agent is not rated on the additional tax which he reports but on the general quality of his work, whether it involves refunds or additional tax.”

But neither the underlying reality of tax enforcement nor the questions would go away. On February 27, 1973, Senator Joseph Montoya’s Appropriations Subcommittee on the Department of Treasury, heard extensive testimony from a number of agents about the agency’s quota systems. Then IRS Commissioner Johnnie M. Walters was given his turn. Montoya prefaced his questions with the statement that he assumed Walters would not admit the existence of IRS quotas.

“Mr. Chairman, you are absolutely right,” Walters replied. “I am not going to admit that. I am going to state flatly that it is not correct.”

But the overwhelming requirements of administering a large agency engaged in the enforcement of an unpopular law and the evidence collected by the Senate committees in 1924, 1972 and 1987 makes the regular denials foolish.

Senator Pryor and his staff are rightly concerned about how the IRS’s quotas sometimes lead to the arbitrary and improper harassment of taxpayers. But interviews with IRS officials, former officials and investigators show that the quotas also have the opposite effect: they cause the agency to ignore the most serious kinds of tax cheats.

Closing Cases


Richard Jaffe lives in Miami and currently works as a special investigator for the county prosecutor investigating the widespread corruption that now infects the Miami Police Department. But for many years he was one of the IRS’s most intelligent and aggressive agents.

During a recent interview. Jaffe told how the quota system encouraged his colleagues working in the agency’s examination division not to refer serious tax fraud cases to the criminal division where he spent his entire IRS career.

“The people in the Examination division are promoted on the basis of the cases they close,” he explained. “The more cases closed, the faster they are promoted. The book says, however, that if they come across a case that looks like fraud, they’re supposed to refer it to the Criminal Division. The problem here is that when an auditor sends a case to criminal, it isn’t closed. Furthermore, if it turns out the auditor has spotted a genuinely serious matter, it may eat up a lot of time and prevent him from closing a lot of other cases.”

It was in this way, Jaffe said, that the quota system operating within the examination division tended to sabotage the work of the criminal division. “I know auditors who in their entire career have never referred a single case to the criminal side,” he said. “What makes it worse is that these are guys who often become senior IRS supervisors.”

A tax lawyer who is a partner in one of Wall Street’s largest law firms also was very aware of the IRS quota systems. “If I want to settle one of my cases, I always make my approach towards the end of the month,” he explained. “It is clear that from about the twentieth to the thirtieth of each month agents are more interested in closing cases than at other times and I have always assumed it was because they were worried about making their monthly statistical requirements.”

Because union president Robert Tobias is an aggressive and effective spokesman for members of his union, his statement to the Pryor Subcommittee that quotas are directly related to the sometimes arbitrary actions of the IRS requires careful examination. But several recent consultant studies undertaken at the request of the IRS itself have come to the same conclusion.

In September of 1986, for example, a consulting firm called Research Management Associates, Inc., completed a detailed study for the IRS on the sensitive subject of assaults and threats made by taxpayers against agency employees. According to the IRS, such attacks increased sharply in the first part of the 1980’s but have declined in recent years. In 1986, IRS agents reported they were subject to 26 assaults, 15 instances of harassment and 384 threats.

The study, based on a detailed analysis of IRS incident reports and a survey of a large sample of IRS agents from four different districts, recommended a number of changes in the selection and training of agents. But a major part of the conclusions focused on the workload of the agents and how their performance was evaluated.

The report said that individual agents frequently were required to handle as many as 100 cases and that there were instances when the workload exceeded 150. The report said that if Congress continued to press for increased audits and more aggressive collection efforts that more attention should be paid to caseloads. “Excessively high caseloads may result in a decline in individual attention to taxpayer problems, and contribute to an increase in threats and assaults against IRS employees who feel they do not have time to research case histories or arrange for protection when warranted,” the report said.

The study linked the problem of excessive caseloads with the way the IRS evaluates its employees. It first noted that IRS policy prohibited quotas. “However, a significant number of employees maintain that, in practice, their performance evaluations, and the evaluations of their group managers, are based almost exclusively on such quantitative measures as the number of enforcement actions taken, the amount of money collected and ‘full pay ratios’ (the number of accounts collected in full, compared with the number of accounts remaining in their inventories.)”

The year before the 1986 study by Research Management Associates, the IRS hired Dr. Bronston T. Mayes, a professor at California State University, Fullerton, to investigate the Sources and consequences of job stress on the revenue officers. Mayes concluded that IRS production pressures, often interpreted by employees as a lack of concern for their physical safety, is a major source of stress.

He also said that such factors as the heavy workload, the ambiguous nature of the tax law and the potential damage that a revenue agent’s actions might have on the life of a taxpayer combined to make the job one of the most difficult occupations in the United States. The research, Mayes said, indicated that revenue officers have more stressful jobs than policemen and accountants and possibly even air traffic controllers.

Because so many aspects of IRS are computerized, it is easy for agency managers to set numerical quotas and evaluate employee performance on the basis of quantity rather than quality. Several years ago, a report by Congress’s General Accounting Office on the state of computer technology in the IRS found the agency already had installed a large number of systems specifically for these purposes. At the agency’s ten major service centers, for example, the IRS operates the Integrated Management and Planning System (IMPIS) which among other functions “provides a means for appraising employees’ performance and determining the variance between actual and planned work.”

The Service Centers covered by IMPIS are responsible for the processing of income tax returns, not the far more sensitive IRS functions of dunning reluctant taxpayers or conducting criminal tax investigations.

But the GAO report also described the Collection Activity Reports System (CARS) operated by the Collection Division and the Case Management and Time Reporting System. The GAO said the second system was designed “to track the progress of cases and projects, accumulate the time charged to investigations” and produce “district output tables” for the Criminal Investigation.

Just this September, another Congressional research group, the Office of Technology Assessment, issued a report on problems raised by computer supervision by both government and industry. The report, which estimated that 20 to 35 percent of federal workers currently are subject to computer monitoring, raised serious questions about how the practice effected “privacy, fairness and quality of work life.”

Electronic Eyes

One example of such electronic monitoring cited by the OTA report concerned the 2,300 IRS employees who dun delinquent taxpayers by telephone. “Performance data is collected by computer (time per transaction, time logged on and available for work); in addition supervisors are required to listen in on calls and monitor for courtesy and correctness of information,” it said.

The steadily increasing computerization of the IRS and the growing reach of the tax law means one thing: despite all the official denials, the decisions of more and more agency employees and managers are going to be dictated by quotas.

What to do? Probably the first thing is to admit their existence. As long as the agency goes on insisting that quotas do not exist, an examination of the problems they create will be impossible. But Patrick Murphy, who headed the New York Police Department in the early 1970’s when it employed 32,000 police officers and 5,000 civilian personnel, knows this kind of public admission is difficult. In many ways, the Department’s size, mission and age are similar to the IRS. Murphy then went on to run the Police Foundation, a sophisticated research organization funded by the Ford foundation.

“Quotas are a very tough political problem for law enforcement,” he said. “If you talk about them in an open way, the public feels they are being picked on unfairly. If you deny what the officers know exists, it feeds their cynicism, leads to even poorer performance and kind of corrupts the whole system.”

Murphy said that quota systems usually are defeated by police officers and by themselves always are a poor substitute for effective leadership. But the former New York Police commissioner, who also was the commander of the departments in Washington, D.C. and Detroit, Michigan, acknowledged there were occasions when such pressures were necessary. “Quotas are a real management dilemma,” he said. “It’s very tough, but in the end I think they probably need to be looked at more directly.”

©1987 David Burnham

David Burnham, a freelance writer, is investigating the Internal Revenue Service.

David Burnham
David Burnham