Congress rewrote the government pay rules in 1998 specifically to help IRS recruit technicians and professionals with the "extremely high level" of expertise seen as necessary to straighten out the agency's operations. Under these rules, IRS can pay certain individuals up to $186,000 per year -- the same amount paid to the Vice President and up to one-third higher than under the regular pay plan. But now the Senator who was among those most deeply involved in pushing the IRS reorganization says that the IRS seems unable to exercise common sense when it uses this special pay authority.

Tax Analysts' reporter George Guttman explains that "critical pay authority" was designed to enable IRS to recruit individuals with expertise of an extremely high level in a technical, administrative, or professional field that is critical to IRS. And he explains that exercise of critical pay authority must be necessary to recruit or retain an individual who is exceptionally well qualified for the position.

So, how is IRS using critical pay authority? Guttman sees some winners and some losers among the 40 authorized critical pay positions. And he questions whether the critical pay supplements actually were needed to bring the individuals who were hired into the government. Many of the critical pay hires from the private sector are semi-retired on generous pensions; so Guttman sees them as motivated by the challenge of the public service job more than by the critical pay. Others in the group (one-fifth of them) were hired at salaries available under the regular government pay plan, so there is no clear need for using critical pay authority to bring them into the IRS.

Guttman also questions if some of the critical pay hires bring to IRS the skills for which Congress was willing to pay premium dollars. For example, six of the current 30 critical pay slots that are filled were allotted to the public relations area and only nine are alloted to technology modernization. That probably is not what Congress intended. According to the ranking Republican on the Senate Finance Committee (which oversees IRS), the goal of critical pay is to "help the IRS do a better job, not better spin."

In addition, IRS has paid between $1000 and almost $200,000 in moving expenses for some of the critical pay hires. And, the agency has paid more than $2.8 million to headhunters who have brought in 44 candidates for these 40 slots.

OMB and OPM opposed the IRS critical pay legislation; Treasury was lukewarm. But the IRS wanted it and got it. It's unclear if Congress would do the same again. Is this what Congress intended? Definitely not, according to Grassley, who wonders why the IRS is incapable of exercising common sense.

Click here for the full text of Guttman's article.