Biden’s IRS nominee to face questions on 2 hot button political topics

Daniel Werfel, President Joe Biden's nominee to head the Internal Revenue Service, should brace for a mind-bending array of questions during his confirmation hearing Wednesday, with a limited ability to respond for now, according to two former IRS chiefs who have been in that hot seat before.

“It's hard to even conceive of what wide range of scope the IRS has,” said Charles Rossotti, who led the service from 1997 to 2002, noting that the IRS directly touches 20% of the U.S. economy. “Who the hell knows what one senator's main interest is going to be?”

John Koskinen, who led the agency from 2013 to 2017, added that Werfel has a steep challenge ahead to convince a distrustful public — and perhaps some Republicans — that things are headed in the right direction.

“It's important for the average taxpayer to be comfortable that everybody's paying what they owe," he said.

If he runs the gauntlet during Wednesday's hearing and is later confirmed by the full Senate, Werfel will take over the department at one of its most consequential moments in recent history with $80 billion from the Inflation Reduction Act set to transform nearly every facet of the agency in coming years.

According to prepared remarks, Werfel is prepared to tell Senators when the hearing kicks off at 10:30 a.m. ET that the agency is currently hamstrung by funding shortages and "following the passage of the Inflation Reduction Act, Americans rightfully expect a more modern and high-performing IRS."

Werfel is also set to underline a promise that both President Biden and Treasury Secretary Yellen have made in recent months: that audit rates will not increase for small businesses and households making under $400,000. The focus instead, he will say, is making sure "America’s highest earners comply with applicable tax laws."

The $80 billion question

The IRS’s $80 billion infusion is designed to help the tax-collecting agency chase down cheats and refresh its shockingly outdated technology. But a claim in right-wing circles says that money will lead to 87,000 new IRS agents going after average Americans — with some claiming many of those agents will be armed.

In August, then-IRS Commissioner Charles Rettig took the unusual step of publishing an op-ed in Yahoo Finance, calling the viral claims “absolutely false” and saying that most new hires will focus on more mundane tasks like answering phones.

On Wednesday, Werfel will face questions from multiple senators — such as committee members Sens. Chuck Grassley (R-IA), Ron Johnson (R-WI), and Marsha Blackburn (R-TN) — who have echoed aspects of the GOP charges.

For instance, Grassley once asked whether the newly empowered agency would “have a strike force that goes in with AK-15s already loaded?" Johnson has claimed the money will “supercharge the IRS to go after American families.”

“I would be disappointed and surprised if people started repeating the claims," Koskinen said. But, when pressed, he acknowledged it remains very possible that “you might hear odd things” from questioners like Sen. Johnson.

Either way, he said the focus should be on revamping the agency after years of underfunding, noting that his tenure "started with 100,000 employees and ended up with 80,000."

Another hot-button political topic from 2013

Also during the questioning, Werfel’s own time at the IRS is likely to be dissected.

He led the IRS on an interim basis for seven months in 2013 after being appointed by then-President Obama following a report from the Treasury's Inspector General for Tax Administration that raised questions about political bias at the IRS when it came to its treatment of nonprofit organizations.

Treasury looked specifically at the tax-exempt status of political groups, which has continued as a important GOP issue in the years since even after a 2017 report found that groups on both sides of the political spectrum faced scrutiny.

At that time, Werfel faced congressional hearings from which he largely emerged unscathed — and even with some GOP fans — after promising big changes were coming for the IRS.

“Werfel provided immediate stability to the IRS, effectively responding to numerous Congressional investigations,” President Biden said last year in announcing his nomination.

Koskenin, who immediately succeeded him, said “as a general matter, he did a really good job there,” joking that Werfel was popular enough he became worried his own confirmation progress might drag on.

As for what to expect Wednesday, Koskenin added: “I think they will want to know what his thoughts are in light of that previous experience, in terms of the ability of the agency to spend this new money effectively and wisely.”

Overall, Koskinen and Rossotti agree that Werfel will likely need to avoid many questions on Wednesday because he simply isn’t on the inside yet. But, if he is confirmed, the hearing will help set the course for his early time in office.

“I'm hoping that there'll be constructive questions and that the nominee will commit to getting back to them with answers,” said Rossotti, noting it's “a very unique situation because they've been doing all this planning, but he hasn't been a part of it, and he is going to be in charge.”

Ben Werschkul is Washington correspondent for Yahoo Finance.

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