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Tea party investigation: Is the problem the IRS or the tax code? (+video)

The acting IRS chief lost his job Wednesday because of the tea party investigation, and Republican leaders want more. But the scandal really points to an IRS in over its head, some experts say.

By Staff writer / May 15, 2013

President Obama makes a statement in the White House in Washington Wednesday on the Internal Revenue Service's targeting of conservative groups for extra tax scrutiny.

Pablo Martinez Monsivais/AP

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Washington

President Obama announced that acting IRS commissioner Steven Miller tendered his resignation on Tuesday, making a man who took the helm after the Internal Revenue Service had stopped targeting conservative groups the first casualty of the IRS’s misdeeds.

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“It’s important to institute new leadership that can help restore confidence going forward,” Mr. Obama said.

But tax experts and campaign-finance analysts say the solution may be less in trying to dig out bad apples than in overturning the entire cart. The IRS scandal is just the latest argument for why America’s tax code may be too complex to function – too massive and ambiguous for an underfunded IRS to enforce well and too complicated for taxpayers to comprehend.

“This will be an issue we delve into in tax reform,” said Senate Finance Committee Chairman Max Baucus (D) of Montana, his chamber’s leading tax-reform champion, on the Senate floor Wednesday. “Clearly something is amiss for the IRS to behave the way it did. “

The president vowed that the White House would work “hand-in-hand” with members of Congress investigating the IRS and that Treasury Secretary Jacob Lew would immediately begin implementing recommendations from an inspector general’s report chronicling the fact that IRS agents gave special scrutiny to tea party groups in 2011 and 2012, actions the president called “inexcusable.”

Attorney General Eric Holder told a congressional panel earlier in the day that the Department of Justice is continuing a criminal investigation of IRS officers involved in the matter.

While Obama had previously hedged his statements on the IRS’s bad behavior in the careful tones of someone waiting for all the facts, the release of the inspector general’s report Tuesday evening gave way to an angrier, more direct approach.

“The misconduct that it uncovered is inexcusable, and Americans are right to be angry about it, and I am angry about it,” he said. “I will not tolerate this behavior in any agency but especially at the IRS, given the power that it has and the reach that it has in all of our lives.”

That angry disposition certainly matches the attitude on Capitol Hill, where House Speaker John Boehner (R) of Ohio said that jail time, not resignations, would be the true measure of accountability.

But the IRS, despite its troubling performance in the matter at hand, is otherwise playing a losing hand.

First is an issue of dollars.

“The tax code has become unmanageably large, and there hasn’t even been an attempt to keep the IRS paced with that,” in regard to funding, says Lloyd Mayer, a professor of law at Notre Dame University in South Bend, Ind.

For that reason, Nina Olsen, the nation’s taxpayer advocate, argued in congressional testimony last week that since her tenure began with the IRS in 2001 she has “never been more concerned” about its ability to advise taxpayers and accurately collect taxes.

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