[Congressional Record Volume 140, Number 40 (Thursday, April 14, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 14, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                                TAX DAY

  Mr. GRASSLEY. Mr. President, April 15, tax day, is upon us. Not the 
most popular day on most people's calendars. The taxpayers worry about 
this day for two reasons: The ever-growing level of taxes we must pay, 
and two, the IRS.
  First let me discuss the level of taxes. Americans still view their 
tax payments as burdensome and unfair. Most people feel they pay too 
much to Uncle Sam. But, we will never get taxes down until we first cut 
spending.
  It is sadly ironic that just when the American people are getting hit 
with their tax bill, the big spenders here in Congress are fighting as 
hard as they can to kill the Exon-Grassley amendment which would reduce 
spending by one-third of 1 percent over 5 years--just $26 billion.
  Like Chicken Little, the big spenders here in Congress are claiming 
that the sky will fall as a result of this minuscule cut. So when 
you're making that check out to the IRS, and you think it is too big, 
you can thank in part the big spenders who oppose the Exon-Grassley 
amendment, because they believe we cannot even cut one-third of 1 
percent out of the budget.
  As ranking Republican of the Finance subcommittee responsible for 
oversight of the IRS let me now turn to a few serious problems within 
the Internal Revenue Service.
  I would like to commend Senator Pryor, the chairman of the 
subcommittee, for his long-time efforts to win passage of the Taxpayers 
Bill of Rights Two, which we coauthored. The intent of this bill is to 
build upon the original Taxpayers Bill of Rights by addressing many of 
the horror stories that people tell from encounters with the tender 
mercies of the IRS.
  I intend to work closely with Senator Pryor to ensure that come next 
April 15 the Taxpayers Bill of Rights Two becomes law.
  As Americans work through the night, well, at least until midnight 
tonight, wading through all this paperwork, I know many are saying 
there must be a better way. I think they are right.
  Let me give you one example. Many of you, myself included, have to 
fill out forms for the Keogh program. In fact, over 889,290 people use 
Keogh plans, deducting over $7 billion.
  We all know how complicated and time consuming it is for businesses 
and individuals to establish Keogh programs and then update them every 
year. It is certainly time that could be much better spent with our 
families.
  You would think that all this paperwork is absolutely essential. Yet, 
how much can the IRS identify that they received from audits of Keogh 
plans? Six million dollars in 1992. Yes, that is million, with an 
``m''.

  Mr. President, I really wonder if that is a fair tradeoff. The 
Congress needs to pursue tax simplification and not ask the American 
people to waste their time filling out forms that only gather dust in 
warehouses.
  It is a great concern of mine that taxpayers realize fair and 
equitable treatment in their dealings with the IRS. That is why I am 
particularly concerned about the findings of the Transactional Records 
Access Clearinghouse [TRAC] located at Syracuse University.
  Prof. Susan Long and David Burnham have conducted an ongoing review 
of the IRS's management and have made some disturbing findings. For 
example, individuals in Nevada are three times more likely to be 
audited as people from New Jersey. You are twice as likely to be 
audited if you live in Manhattan than if you live in Brooklyn. You are 
twice as likely to be audited if you live in Wyoming than if you live 
in Philadelphia.
  I can see tax cheats reading this report and deciding to move where 
they are less likely to get caught.
  TRAC found that there was great variance nationwide in the IRS 
agreeing to an installment agreement for taxpayer delinquent accounts. 
There was a 1,000-percent difference in the IRS agreeing to installment 
payments if you lived in Indiana versus New Hampshire. Taxpayers are 
more than three times as likely to get an installment agreement if you 
live in San Francisco versus Los Angeles and more than twice as likely 
to get an agreement if you lived in Cleveland versus Cincinnati.
  Similar disparities exist when the IRS decides to seize the accounts 
of delinquent taxpayers. A 1,000-percent difference in deciding to 
seize or not seize exists between Austin and Dallas. Los Angeles and 
San Francisco, and Manhattan and Brooklyn.
  Even the IRS admits that you are more than four times as likely to 
have the IRS offer to compromise in Iowa than you are in California. So 
the message is clear, if you want to negotiate with the IRS move to 
Iowa, although I am not sure the Iowans who have to negotiate with the 
IRS would agree.
  The underlying assumption is disturbing: The kind of treatment you 
get depends on where you live. Mr. President, I ask unanimous consent 
that these TRAC findings be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             IRS seizure rate taxpayer delinquent accounts

                              [In percent]

TX (Austin).........................................................4.1
CA (San Jose).......................................................3.1
FL (Ft. Lauderdale).................................................2.7
PA (Pittsburgh).....................................................2.6
CA (Los Angeles)....................................................2.4
NY (Brooklyn).......................................................1.9
Connecticut.........................................................1.3
TX (Dallas).........................................................0.4
TX (Houston)........................................................0.3
FL (Jacksonville)...................................................0.3
Massachusetts.......................................................0.3
New Jersey..........................................................0.2
CA (San Francisco)..................................................0.2
NY (Manhattan)......................................................0.2
PA (Philadelphia)...................................................0.2
    U.S. Average....................................................0.5
                                  ____


         IRS installment agreements taxpayer delinquent accounts

                              [In percent]

Indiana............................................................22.7
TX (Houston).......................................................19.0
OH (Cleveland).....................................................17.2
CA (San Francisco).................................................16.3
TX (Dallas)........................................................15.5
New Jersey.........................................................13.3
NY (Manhattan)......................................................8.7
CA (San Jose).......................................................7.2
OH (Cincinnati).....................................................6.4
CA (Los Angeles)....................................................5.9
PA (Philadelphia)...................................................5.3
TX (Austin).........................................................5.3
NY (Brooklyn).......................................................5.1
PA (Pittsburgh).....................................................3.4
New Hampshire.......................................................2.2
    U.S. Average...................................................12.7
                                  ____


              IRS audits of individual income tax returns

                              [In percent]

Nevada..............................................................1.9
Wyoming.............................................................1.5
NY (Manhattan)......................................................1.4
North Dakota........................................................1.1
Georgia.............................................................1.0
NY (Brooklyn).......................................................0.7
PA (Philadelphia)...................................................0.6
Connecticut.........................................................0.6
Massachusetts.......................................................0.5
New Jersey..........................................................0.5
    U.S. Average....................................................1.0
  Mr. GRASSLEY. I asked the Department of the Treasury what steps the 
IRS has taken to ensure that there is uniformity nationwide in the 
treatment of taxpayers. I ask unanimous consent that the Department's 
response--a nonanswer--be printed in the Record as an example of 
bureaucrat-speak at its finest.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                       Taxpayer Uniform Treatment

       Question 6: What management steps has the IRS taken to 
     ensure that there is uniformity nationwide in the treatment 
     of taxpayers for tax violations?
       Answer: The Service's primary selection for auditing 
     returns begins with our Taxpayer Compliance Measurement 
     Program (TCMP). This involves the random selection of 
     taxpayers for comprehensive audits. The results of the audits 
     are analyzed to develop discriminant functional (DIF) data 
     which is used to score returns as they are filed. A return 
     with a higher DIF score is more likely to have errors. The 
     system also is used to determine levels of compliance for 
     various classes of taxpayers and to develop yield curves. The 
     yield curves are used to predict the amount of additional 
     taxes that would be assessed at varying levels of coverage.
       Management considerations in allocating resources for the 
     auditing of tax returns and the collection of amounts due is 
     based on resource availability and workload. The IRS 
     determines the number of returns by taxpayer class to audit. 
     The returns are generally selected based on DIF scores which 
     cause the returns with the highest potential tax adjustment 
     to be selected first, regardless of location. This allows the 
     IRS to maximize revenue to the government and ensures that 
     the most non-compliant classes of taxpayers are most likely 
     to be audited. The IRS uses the Collection Resource Database 
     and Information Tracking System (CREDITS) to base its 
     resource allocation decisions. Recommendations by the 
     Collection Resource Allocation Study Group are being 
     implemented (See Attachment A). These actions will improve 
     the staffing/workload balance among District Offices.
       Because of geographic and demographic differences, 
     workload/staffing balance among District Offices will never 
     be perfect. However, actions are being taken to improve it by 
     designating some District Offices as ``no growth areas'' 
     where resources will be allocated sufficient to fund 
     permanent employees less attrition.
       In addition, the IRS has instituted new ways of doing 
     business such as Compliance 2000 and the Market Segment 
     Specialization Program (MSSP) which have resulted in the 
     creation of industry agreements on the way certain issues 
     should be reported and auditing guidelines to standardize the 
     audit techniques used by examiners nationwide. The Office of 
     Penalty Administration serves as a focal point for assuring 
     Servicewide consistency of the application of penalties.

  Mr. GRASSLEY. Another issue that concerns me is the IRS' handling of 
anonymous tips. Before the Berlin Wall came down, we all heard about 
places where friends and neighbors called in and informed on each 
other. Its something totalitarian governments like to encourage.
  The IRS has its own peculiar program that rewards and encourages 
people to point the finger at private citizens. The IRS will open an 
investigation on you or me without our knowledge based on minimal 
information. If the IRS finds nothing wrong, your faceless accuser will 
not be punished for his mistake.
  I asked the Department of the Treasury several questions about this 
program, and its replies are disturbing. Approximately 40 percent of 
the people investigated by the IRS based on outside accusations were 
found to be completely innocent. However, that does not mean they were 
not subject to intense scrutiny by the IRS.
  And how much did the IRS recover from the rest of the people? A 
couple million bucks out of well over $1 trillion in revenue. The 
Congress needs to consider whether this policy is a cost-efficient use 
of the time of IRS agents; but more importantly, whether the benefits 
from this policy are really worth the drawbacks to the freedoms we all 
cherish.
  Finally, let me note that these concerns about the IRS are not 
specific to this administration. These are issues that well predate the 
current administration. I know that the Department of the Treasury has 
good intentions, and I hope to work with them to address these and 
other issues and report to the taxpayers better news next April 15.
  I yield the floor.
  Mr. COVERDELL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Georgia.

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