The Pale King: An Unfinished Novel

by David Foster Wallace

  965882433

  ‘There have been frequent studies. Two-thirds of taxpayers think an exemption and a deduction are the same thing. Don’t know what a capital gain is. Four percent every year don’t sign their returns. Shit, two-thirds of people don’t know how many senators a state has. Something like three-quarters can’t name the branches of government. This is not rocket science we’re doing here. The truth is, most of our time is wasted. The system kicks us mostly shit. You spend ten minutes filling out a 20-C on an unsigned return, it goes back to the SC, a bullshit letter audit requesting a signature, nothing at stake. And then now in Rotes we’re reviewed on the basis of increased revenue from audits down the line. It’s a joke. Most of the stuff we’re looking at isn’t auditable, it’s just rank stupidity. Carelessness. You should see people’s handwriting—average people, educated people. The truth is, they waste our time. They need a better system.’

  981472509

  ‘Tate is a moth at the arc lights of power. Pass it on.’

  951458221

  ‘It’s a fascinating question. The background is interesting, if you delve into it. Type of thing. One of the tenets of the incoming administration was the belief that marginal tax rates could be lowered, especially in the top brackets, without causing a catastrophic loss of revenue. This had been an explicit part of the campaign. Platform type of thing. I’m no economist. I know the theory was that lower marginal rates would spur investment and increased productivity, type of thing, and there would be a rising tide that would cause an increase in the tax base that would more than offset the decrease in marginal rates. There is a whole technical theory behind this, though some dismissed this as voodoo science. Type of thing. By late in the first year, sure enough, the regs are different, the top brackets are lowered. It goes on that way. By, say, two years in, though, it’s fair to say the results contradicted the theory. Revenues were down, and these were hard numbers that could not be fudged or massaged. There were also, I believe, very large increases in defense spending, and the federal budget deficit was the greatest in history. In adjusted dollars type of thing. You have to understand that this was all playing out at a far higher level of government than the level we’re working at here. But anyone could understand the budget problems were a real rock-and-hard-place type of thing, since backpedaling and raising marginal rates again was politically unacceptable, ideologically you could say, as was compromising on the military, and gutting social spending any further would make relations with Congress unworkable. Type of thing. All of this one could almost know just from reading the newspaper, if you knew what to look for.’

  Q.

  ‘Yes, but in terms of what we knew here, at our level here in the Service. Some of it was not in the papers. I know the executive branch had several different plans and proposals they were considering, to address this problem. The deficits, the hard place. My sense is that most of these were not appealing. Type of thing. Understand, all this is filtering down from a great height, administratively. The version we got here on the regional level is that someone very high up in the Service’s structure, someone close to what’s known around here as the Three-Personed God, resurrected a policy paper originally written in either 1969 or 1970 by a macroeconomist or systems consultant on the staff of the former Assistant Commissioner for Planning and Research at Triple-Six. The one that resurrected it was, under this account, an Assistant Deputy Commissioner for Systems, which by that time had absorbed the Planning and Research Branch as now a division of Systems in a reorganization, Systems had, type of thing, although that previous Planning and Research AC was also now the DCS.’

  Q.

  ‘Now meaning in terms of when the Spackman Memo was resurrected, which was in or around the fourth quarter of 1981.’

  Q.

  ‘The DCS is part of what’s known as the Three-Personed God, the [inaudible] term for the top triad of Commissioner, Deputy Commissioner for Systems, and Chief Counsel. The three top spots in the Service organization. The national office of the Service is known as Triple-Six because of the address. Type of thing.’

  Q.

  ‘These types of high-level proposals and white papers are generated all the time. Planning and Research has what amounts to think tanks type of thing. This is common knowledge. Full-time teams exclusively tasked to generating long-range studies and proposals. There’s a famous policy paper from a P&R group in the 1960s, type of thing, on the implementation of tax protocols following a nuclear exchange. Called “Fiscal Planning for Chaos,” which became rather a famous term around here, a kind of joke when things became hectic, chaos type of thing. Overall, few of them are made public. From the mid-sixties. Your tax dollar at work type of thing. This one that was resurrected in this context, though, was far less grand or explosive. I don’t know its precise title. Sometimes it’s known as the Spackman Memo or the Spackman Initiative, but I know of no one that knows who the eponymous Spackman was, type of thing, whether he was the author of the policy paper or the P&R official for whom the thing was written. It was generated, after all, in 1969, which was lifetimes ago in the institutional life of the Service. Most of them get filed away, type of thing. Understand, this is a compartmented agency. Many of the procedures and priorities of Triple-Six are simply out of our area. Type of thing. The Initiative’s reorganizations, though, affect us directly, as I’m sure someone has explained. The original paper was said to be several hundred pages in length and very technical, as economics tends to be. Type of thing. But on a general level, the effective principle of the part or parts that came to later light was said to be quite simple, and it—[inaudible]—through routes unknown, it came to the attention of parties at the very highest levels of either the Service or the Treasury Department, and created interest because, in the budgetary impasse of the current executive branch, it appeared to describe a politically more appealing way to ameliorate the rock-and-hard-place of unexpectedly low tax revenues, high defense outlays, and an uncuttable base floor in social spending. At root, type of thing, the paper’s proposal was said to be very simple, and of course the current executive approves of simplicity, arguably because this administration is somewhat of a reaction type of thing, or backlash, against the complex social engineering of the Great Society, which was a very different era for tax policy and administration. But its preference for simple, instinctive arguments is common knowledge. Type of thing. By the way, I can’t help noticing you’re wincing.’

  Q.

  ‘By all means.’

  Q.

  ‘As we understood it, the Spackman paper’s root observation was that increasing the efficiency with which the Service enforced the extant tax code could provably increase net revenues to the US Treasury without any corresponding change in the code or a raising in marginal rates. Type of thing. Meaning it directed attention to Compliance and the tax gap. Should I define the gap, type of thing? Is this already defined by someone else? Are you asking everyone the same type of thing for this? Would the Service prefer that I not go into this?’

  Q.

  ‘I suppose it’s self-evident, type of thing. It’s the difference between total tax revenues lawfully due the US Treasury in a given year and total taxes actually collected by the Service in that year. It is rarely spoken of openly, largely [inaudible]. It is now the bête noir type of thing of the Service’s focus. Though not at the time. It had been estimated, in the Spackman paper, that between six and seven billion dollars lawfully due the US Treasury in 1968 had not been remitted. Spackman’s econometric projections placed the tax-gap figure for 1980 at close to twenty-seven billion, which appeared, by the time of the paper’s resurrection, to be overly optimistic. Excluding appeals and litigation, the measured tax gap for 1980 was actually in excess of thirty-one and a half billion dollars. What was remarkable was that the tax gap’s size had not been much remarked on or made the object of serious attention. I believe this is why it’s rarely spoken of openly, the institutional stupidity of this, type of thing. O
r that this is why the Spackman paper never received serious attention, although as I said, policy papers like this are generated by Systems all the time. Institutions can be much less intelligent than the individuals that make them up. Type of thing. There’s also the fact that the Service is concerned to have the taxpaying public see it as nothing but a completely efficient, all-knowing instrument of tax collection—there are complex psychodynamics involved in taxation and the public’s willingness to comply with tax law. For one thing, too much efficiency can be misconstrued as hostility, excessive aggression type of thing, which increases TP hostility and can actually negatively affect the public’s compliance and the Service’s mandate and budget, type of thing. Meaning the whole matter is complex, type of thing, and the psychodynamics are outside our area, and my understanding of it all is quite vague and general, type of thing, though we know that it is a matter of considerable interest and study at Triple-Six. Spackman’s report, the subsection of interest, was resurrected by some person or persons close to the Three-Personed God. There are conflicting versions as to just whom. Type of thing. I’m speaking of a period roughly two and a half years ago.’

  Q.

  ‘At root, according to the policy paper, the gap was a matter of compliance. Type of thing. Obviously—since the gap represented a given percentage of noncompliance. But the subsection of the memo of interest concerned the parts of the tax gap that could be profitably addressed by the Service. Reduced, ameliorated. Type of thing. Meaning heightened revenue. A certain portion of the annual tax gap was due to an underground cash economy, barter mechanisms and in-kind exchanges, illicit income, and certain very sophisticated tax-avoidance mechanisms for the wealthy that could not be addressed in the short term. But Spackman’s paper’s analysis argued that a significant portion of the gap was the result of remediable misreporting, including Individual Forms 1040, which he argued could be addressed and ameliorated in the short term. The short term, for understandable reasons, the current administration was particularly keen on. Hence the intersection of technical policy and politics, which is how change occurs at the national level, then trickles down to us in the trenches, type of thing, through reorganizations and changes in Performance Review criteria, since 1040s are the purview of Rote Exams. Should I explain the different areas and types of examinations done here?’

  Q.

  ‘Not at all. On a root level, Spackman’s memo broke the remediable, 1040-related portions of the tax gap down into three broad areas, categories, type of thing—nonfiling, underreporting, and underpayment. Nonfiling, in most cases, is the purview of CID. Criminal Investigations. Underpayment is handled through the Collections Division, a very different outfit, both philosophically and operationally, from what we do here in Exams, type of thing, although our two divisions, Exams and Collections, along, of course, with Audits, form the brunt of the Initiative. Which is also, organizationally, the Compliance Branch. At root, as examiners, we here deal with underreporting. Type of thing. Understated income, invalid deductions, overstated expenses, improperly claimed credits. Discrepancies, type—’

  Q.

  ‘At the root level, the argument of the Spackman Initiative, as it’s come to be called here, both philosophically and organizationally, was that these three elements of the tax gap could be ameliorated by increasing the efficiency of the IRS respecting compliance. It’s not difficult to see why this notion caught the political administration’s eye as a potential third option, a way to help address the increasingly untenable revenue shortfall without raising rates or cutting outlays. Type of thing. Needless to say, this is all very simplified. I am attempting to explain the extraordinary developments that have taken place in the structure and operations of the Service as we here at the regional level experience it. It has been, to say the least, an unusually exciting year. And the root cause of the excitement, and also a certain amount of controversy, is the Spackman Initiative. This is what it came to be called. A sweeping, far-reaching reorientation in the Service’s institutional sense of itself and its role in policy. Type of thing. Listen—are you all right?’

  Q. [Pause, interval of static.]

  ‘—of thing, which Triple-Six also found advantageous, argued that, under certain technical conditions, each dollar added to the Service’s annual budget could be made to yield over sixteen dollars in additional revenue to Treasury. A good deal of this argument’s body was devoted to considering the IRS’s peculiar status and function as a federal agency. A federal agency is, by definition, an institution. A bureaucracy. But the Service was also the only agency in the federal apparatus whose function was revenue. Income. Meaning whose mandate was to maximize the legal return on each dollar invested in its annual budget. Type of thing. More than any other, then, according to the resurrected Spackman, there was compelling reason to conceive, constitute, and operate the IRS as a business—a going, for-profit concern type of thing—rather than as an institutional bureaucracy. At root, the Spackman report was intensely anti-bureaucratic. Its model was more classically free-market. The attractiveness of this to the free-market conservatives of the current administration should be understandable. This, after all, is an era of business deregulation. How best, and how much, to in a sense deregulate the IRS—which, of course, as a federal agency, was set up and operates as a set of legal regulations and mechanisms for enforcement—this was a thorny and still-evolving type of question type of thing. Some saw Spackman as an ideologue. Not every proposal in the original paper was resurrected—not everything became part of the Initiative. But the time was right, politically speaking, type of thing, for at least the root essence of Spackman’s proposal. It would be difficult to overemphasize the consequences of this shift in philosophy and mandate for those of us on the ground of the effort. The Initiative. For example, an intensive new recruitment and hiring effort and an almost 20 percent increase in Service personnel, the first such increase since TRA ’78. I refer also to a massive and seemingly endless restructuring of the Service’s Compliance Branch, the most relevant [inaudible] of which to us here was the fact that the seven Regional Commissioners have assumed more autonomy and authority under the more de-decentralized operational philosophy of the Spackman Initiative.’

  Q.

  ‘This is another complicated subject, one that involves an extensive knowledge of US tax law and the history of the Service as part of the executive branch and yet also overseen by Congress. A critical part of what’s now known as the Spackman Initiative involved finding an efficient middle way between two opposing tendencies that had hampered the Service’s operations for decades, one being the decentralization mandated by the 1952 King Commission in Congress, the other being the extreme bureaucratic and political centrism of the national administration at Triple-Six. One could say that the 1960s was an era, speaking within the institutional history of the Service, in which the District office predominated. The 1980s is shaping itself to be the era of the Region. Type of thing. As an organizational middle ground between the many Districts and unitary Triple-Six administration. Administrative, structural, logistical, and procedural decisions are now far more in the hands of the Regional Commissioner and his deputies, that, in turn, delegate responsibilities according to flexible but coherent operational guidelines, type of thing, which results in more root autonomy for the centers.’

  Q.

  ‘Each Region including one Service Center and, with one current exception, one Examination Center. Shall I explain the exception?’

  Q.

  ‘At root, under the Initiative, Regional Service and Examination Centers are allowed considerably more latitude in structure, personnel, systems, and operations protocols, resulting in increased authority and responsibility on the part of these facilities’ Directors. The guiding idea is to free these large central processing facilities from oppressive or hidebound regulations which impede effective action. Type of thing. At the same time, extreme pressure is applied with respect to one and only one primary, overarching go
al: results. Increased revenue. Reduced noncompliance. Reduction of the gap. Not quite quotas, of course—never that, of course, for reasons involving fairness and public perception—but close. We’ve all watched the news, you and I, and yes, more aggressive auditing is part of the picture. Type of thing. But the shifts and emphases in the Audits Divisions are largely changes of degree, a quantitative type of thing—including the advent of automated letter audits, which again is outside our area of working knowledge here. For us, however, in Examinations, there has been a dramatic, qualitative shift in operational philosophy and protocols. It can be felt by the lowliest GS-9 at her keypunch console. If Audits are the Initiative’s weapon, type of thing, we in Exams are the telemetrists, tasked with determining where best to point that weapon. As deregulated, there is now only one overriding operational question: Which returns are most profitable to audit, and how are those returns most efficiently to be found?’

  947676541

  ‘I have an unusually high tolerance for pain.’

  928514387

  ‘Well, my dad used to like to mow the lawn in little patches and strips. He’d do the east corner of the front yard, come in the house for a while, then do the southwest strip of the back lawn and a little square at the south fence, come back in, and like that. He had a lot of little rituals like that, it’s how he was. You know? It took a while to realize he did this with the lawn because he liked the feeling of being done. Of having a job and feeling like he did it and it was done. It’s a solid little feeling, it’s like you’re a machine that knows it’s running well and doing what it was made to do. You know? By dividing the lawn into like seventeen small little sections, which our mom thought was nuts as usual, he could feel the feeling of finishing a job seventeen times instead of just once. Like, “I’m done. I’m done again. Again, hey look, I’m done.”