Targeting ‘Little Guys’ for IRS Audits Is Overruled as Unfair

White House budget officials last year suggested focusing IRS audits on middle-income taxpayers rather than large corporations, but they were overruled by higher-level officials, documents released by a congressional committee show.

The proposal pushed by officials of the White House Office of Management and Budget would have been neither “fair or effective,” Rep. J. J. Pickle (D-Tex.), who released the documents, said Wednesday. A senior OMB official agreed.

The idea of focusing attention on middle-income taxpayers is “defensible” as a budget matter, because “it returns the highest rate of investment--we have so many people in that category,” OMB Deputy Director William Diefenderfer said. But the budget examiners who suggested the idea “did not think about the equities of the tax system. That’s not their job.”

When IRS Commissioner Fred Goldberg objected to the plan, saying that it was inequitable, “he sent it back at a policy level. We said, ‘Fred, you’re right,’ ” Diefenderfer said. As a result, the idea was killed.

Goldberg added that Internal Revenue Service policy has been to “go after the big guys who are not paying their share, and we are going to do it.”