The Inflation Reduction Act (IRA) of 2022 enacted an $80 billion 10-year investment in the Internal Revenue Service on top of the agency’s regular annual appropriations. Although Congress cut the IRA funding by over 25 percent the following year, the agency has maintained its commitment to the transformative IRS Inflation Reduction Act Strategic Operating Plan to bring the agency into the 21st century. That plan includes detailed objectives and a summary of what success would look like for each new initiative. But it does not provide specific metrics for evaluating the agency’s performance in achieving many of those goals. 

Well-defined performance metrics will provide insight into the overall return on the now nearly $60 billion investment, inform the IRS’s choices between various programs, and identify ways to improve a program’s effectiveness. 

The paper lays out a holistic approach to measuring the IRS’s performance with outcome measures that are (1) transparent and consistent with the service, enforcement, and equity goals emphasized in the IRS mission statement; (2) tied to measurable outputs and, in some cases, inputs and efficiency; and (3) reflective of the reality that some factors are beyond the control of the IRS. 

Importantly, performance metrics should be bundled together to allow lawmakers and administrators to understand the trade-offs between goals and weigh the choices between various IRS activities. Finally, the effectiveness of all IRS actions cannot be reduced to a single quantitative metric or even a bundle of metrics. Performance measures are not a replacement for a thorough evaluation of the IRS’s actions.