The White House announced on Thursday that President Biden will nominate Daniel Werfel to lead the Internal Revenue Service, tapping a former budget official to spearhead implementation of key parts of the administration’s economic agenda.
The nomination comes at a critical moment for the IRS. Congressional Democrats this year approved an $80 billion increase in the agency’s budget, aiming to increase federal revenue by targeting tax cheats. Congressional Republicans have vowed to resist those changes and devoted much their 2022 midterm campaign message to attacking Biden’s plan to beef up the IRS. A GOP-led House could launch major battles against the tax agency. The IRS will also oversee the disbursal of hundreds of billions of dollars in clean-energy tax credits, approved in Democrats’ economic package, that experts view as crucial in the fight against climate change.
“Danny’s prior service under both Democratic and Republican administrations, his deep management experience, and his work directing significant transformation efforts, make him uniquely qualified to lead the agency at this critical juncture,” Treasury Secretary Janet L. Yellen said in a statement. The Treasury Department oversees the IRS. “Danny’s deep commitment to fairness and making sure government works for all will also be invaluable as we improve the taxpayer experience and eliminate a two-tiered tax system,” she added.
If confirmed by the Senate, Werfel would also face the challenge of improving IRS customer service, which struggled amid the pandemic after years of GOP-led budget cuts. The IRS taxpayer watchdog reported over this summer that the agency had a backlog of 21.3 million returns, and call response rates have plummeted. Only 1 in 10 of the 73 million taxpayer calls for help reached an employee in the last filing season.
Control of the House and Senate next year remains unclear, with results still being tallied in key races from this week’s elections, but the partisan stakes of the role could be high. The current IRS commissioner, Charles Rettig, is leaving when his term expires Saturday. He was nominated by President Donald Trump in 2018 and faced an uproar from congressional Democrats over his refusal to turn over Trump’s tax returns. Democrats praised Rettig during the Biden administration, however, over his implementation of coronavirus spending measures such as stimulus checks and the expanded child tax credit.
Werfel is no stranger to political fights on Capitol Hill. John Koskinen, who served as IRS commissioner after being nominated by President Barack Obama, said Werfel worked effectively with the GOP at the height of the anger over accusations that the tax agency had targeted tea party groups for additional scrutiny.
“He was dropped into the middle of a maelstrom,” Koskinen said. “And he did a good job of responding positively to congressional inquiries.”
But at least one leading House Republican on Thursday criticized Werfel’s performance during that period.
“Daniel Werfel was named acting IRS commissioner in 2013 with the goal of restoring credibility and confidence in the IRS after the agency’s shameful targeting of conservative groups,” said Rep. Kevin Brady (R-Tex.), the top Republican on the House Ways and Means Committee. “He didn’t succeed in 2013 and I’m concerned about whether he can succeed in 2023 and beyond.”
Douglas O’Donnell, a deputy commissioner and longtime IRS official, will lead the agency on an interim basis starting Saturday.
Frank Clemente, executive director of Americans for Tax Fairness, a left-leaning group, said the next leader of the tax agency faces the crucial task of “vigorously going after tax cheats to make sure they pay their fair share.”
“The IRS commissioner is getting a huge infusion of money to bring the agency into the modern age,” Clemente said. “It’s an extremely important position, especially given the target on the agency’s back from Republicans.”