Program to Upgrade IRS Computers ‘Badly Off Track’
The Treasury Department acknowledged Thursday that its decade-long, multibillion-dollar effort to modernize the Internal Revenue Service’s computers is “badly off the track” and must be rethought from top to bottom.
The project, which is meant to replace the 1960s equipment the agency now uses and to make it easier for IRS workers to process returns and answer taxpayer questions, has already cost the government about $4 billion. Ultimately, its cost is expected to exceed $20 billion when maintenance and operating expenses are included.
But the project has been “more grand and more elaborate than was consistent with feasible budgetary reality” and was driven by what technology was available rather than what would make the best tax collection system, Deputy Treasury Secretary Lawrence Summers told a House appropriations subcommittee Thursday.
“It was all about better hardware, rather than about better service,” Summers said. “Let me say this very plainly. The [IRS project] went badly off the track.”
The IRS is operating with 30-year-old computers that often cannot communicate with one another and which use magnetic tapes that are trucked or flown around the country.
At the same time, the number of taxpayers and the complexity of tax law has grown, and the IRS is under pressure to reduce fraud, cut paperwork and do a better job of collecting all owed tax. IRS officials believe it is a matter of time before the demands on the agency outstrip the system’s capacities.
Summers and IRS Commissioner Margaret Milner Richardson said the agency had gotten some benefits from the $4 billion spent so far.
The commissioner noted that a new system that gives revenue officers online access to current taxpayer records is operating in two IRS districts and has increased workers’ efficiency 30% in collecting taxes. This system is expected to be operational nationwide by fiscal 1999 and to result in an additional $2 billion in collections through 2004.
The Tax Systems Modernization effort, as it is known, is the second giant government computer program to consume years of work and billions of dollars without producing the promised payoff.
The Federal Aviation Administration has had similar problems developing a new computer system for air traffic control, and together the projects raise questions about the government’s ability to design and purchase systems in the rapidly evolving field of technology.
The IRS’ fundamental problem is not technology but “a lack of effective management,” said subcommittee Chairman Jim Lightfoot (R-Iowa). “This is not rocket science.”
Lightfoot called the modernization program a “$4-billion fiasco,” and said he is “prepared at this moment to zero the whole program out.”
The Clinton administration will seek $850 million more for the project for fiscal 1997, Summers said.
The General Accounting Office and the National Research Council have both studied the project and concluded that one of its biggest problems is that the IRS has not clearly expressed how to link computer technology to its tax collection task.
