Annual conference remarks of Margaret Milner Richardson, Commissioner of Internal Revenue.

• Position: Tax Executives Institute 49th Annual Conference - Transcript

Over the past fifty years, TEI and the Service have shared a rich history, and a mutually rewarding relationship. The excellent retrospective on TEI at fifty--Serving the Profession--points out that one of the reasons TEI was created was to give "taxmen" (fortunately, Linda [Burke, TEI's first female president!, some things have changed!) the opportunity to talk to one another. To our mutual advantage, the IRS has been included in this dialogue.

Although our organizations do not always agree on specific issues, our point of departure has always been the same--a belief that voluntary compliance with the tax laws is the cornerstone of our tax administration system. Justice Oliver Wendell Holmes observed that, "Taxes are what we pay for a civilized society," and those words are carved in stone--above the entrance to the IRS headquarters in Washington, D.C. The thought behind those words is echoed in the TEI Standards of Conduct, which require that each TEI member "accept taxes as the cost of civilization."

San Francisco is so close to Napa and Sonoma that I am tempted to compare the evolution of organizations, such as mine and yours, to the maturation process of a fine wine. Both start off young and untested. With proper care, over time, they can become well-rounded, robust, more complex. If they are of high quality, they grow better with age. At fifty, I would say that TEI is well on its way to becoming an award winning vintage.

Thinking about TEI's Golden Anniversary, I thought it would be interesting to look back over the past fifty years and reflect on the path TEI and the IRS have shared together and where that path may lead over the next fifty years.

Almost exactly 50 years ago, in the Fall of 1944, General Douglas MacArthur waded ashore in the Philippines, fulfilling his promise to return. President Roosevelt was elected to an unprecedented fourth term, and the year ended with the halt of the final German offensive in the Battle of the Bulge. On the home front, the Roosevelt Administration hoped to pay for at least half the cost of the war through increased taxation. In 1942, a Victory Tax had been imposed on net income. The following year, employers for the first time were required to withhold taxes from the wages of their employees. By 1944, the excess profits tax rate had risen to 95 percent.

Because of the economic demands of World War II as well as the need to provide incentives for businesses supporting the war effort, Congress passed a record number of revenue measures and special tax credits. The result of these efforts was a dramatically expanded and complex tax law. By 1944, President Roosevelt was touting tax simplification as a major goal in his annual budget message to Congress.

The changes in the tax law between 1940 and 1945 transformed American taxation into a system affecting nearly every American. In response, the Bureau of Internal Revenue's staffing grew from 22,000 in 1941 to nearly 60,000 by 1945. During this period, corporate income tax collections rose dramatically. In 1941, the Bureau took in about $950 million in corporate tax payments. Five years later, we collected nearly five times as much, $4.7 billion. Individual income tax collections rose even more quickly during the war.

Never before had there been such a great need for tax professionals. The more complicated tax laws of World War II demanded that corporations, large and small, hire specialists to guide them through the new laws, rates, forms, and procedures.

It was in this environment that Paul Smith founded Tax Executives Institute. The Institute has grown from 12 "taxmen" at its first meeting in 1944 to 5,000 members and 47 chapters today. Over its rich 50-year history, TEI has advanced the experience and education of its membership and has facilitated a healthy interaction between its members and the Internal Revenue Service. TEI is successfully accomplishing its mission: to promote competence and professionalism in both the private and government sectors. Very early, the Bureau of Internal Revenue recognized the importance of working with private stakeholders in a cooperative manner to enhance tax administration. In 1946, the then- Commissioner recognized that "[t]he administrative practices and policies of the Bureau affect to some degree virtually every business unit. Individual businessmen and business concerns are dependent in many ways upon the cooperation of the Bureau to aid them in the lawful operation of their financial affairs."

This observation is as true today as it was fifty years ago.

Reinventing the IRS

Today, because of the growth in technology and a rapidly changing political and economic environment, sound tax administration requires cooperation between the government and the private sector. Technology is developing rapidly, and changes in world politics have led to a burgeoning global economy. No longer can business stop at national borders.

In this rapidly changing environment, governments, too, must adapt. No longer can governments focus merely on transactions within their borders. In short, as businesses have expanded their horizons, governments have had to expand theirs. There are increasing opportunities for governments around the world to discuss areas of mutual concern in tax administration. In fact, today I am on my way home from a meeting with the Pacific Association of Tax Administrators--my counterparts in Japan, Canada, and Australia. After attending a number of similar meetings, it is clear to me that tax administrators around the world have many more areas of agreement than disagreement. Also, as the global marketplace of products and ideas has expanded, the private sector has had to contend with important lessons the 1980s taught about the economy at home and abroad. In contrast to the post-World War II period where resources seemed endless, business women and men around the world have learned that...