[Congressional Record Volume 142, Number 126 (Friday, September 13, 1996)]
[Senate]
[Pages S10546-S10551]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX REFORM AND TAX RELIEF
Mr. COVERDELL. Madam President, it is our intention during the hour
under our control to continue the discussion of the importance of tax
reform and tax relief for the American people at this time in which
they are bearing the highest tax burden in American history. We have
been joined by my distinguished colleague from Wyoming. I yield up to
10 minutes to the Senator for the purpose of expounding on this
subject.
The PRESIDING OFFICER. The Senator from Wyoming.
Mr. THOMAS. I thank the Senator from Georgia for setting up some time
to talk about the issue that most of us talk about all the time, and
that is taxes. It is an issue we should talk about. It is an issue that
cuts very deeply into our lives. We spend an average of nearly 40
percent of our income on taxes at various levels. So it is something we
ought to talk about.
I think part of the focus today--I talked about this earlier, as a
matter of fact--is on the philosophical idea of taxation, whether you
have less or more, whether you have smaller government or larger
government, and that is a choice. But, more specifically, I think this
hour was to look a little bit at simplification, to look a little bit
at the difficulty of collection, to look a little bit at some of the
debates and discussions that go on with respect to the IRS. Many people
are very disillusioned with the IRS, and I do not defend that agency
particularly, but I do tell you basically you have to have a
simplification of taxation if you are going to have simplification of
collection. Probably there is nobody here who would disagree with that.
But it never seems to happen.
Every year we talk about simplification. Every year we talk about
making it easier. But we keep going on. The current tax system is a
mess. It is extremely difficult. It is a result of probably 80 years of
debate and discussion and, frankly, abuse, by lawmakers, by lobbyists,
by special interests--perhaps unintentionally. But, in any event, I
think no one would argue with the fact that we have, now, a tax system
that is extremely difficult, extremely cumbersome, extremely
ineffective and unfair. It is certainly too complex and much too
costly. And of course the tax system itself punishes the idea of
investment, punishes the idea of incentive, punishes the idea of
saving. And all those things go together.
I have already mentioned the figures. We pay nearly 40 percent. That
is an astounding figure, really, in terms of a working family who--most
families are working families--has to work until late May to pay their
taxes.
Mr. COVERDELL. Madam President, I wonder if the Senator will yield
for a question?
Mr. THOMAS. Certainly.
Mr. COVERDELL. In this debate about the working family there are two
figures that are constantly quoted. One is 40 percent. I typically use
50. I wonder if the Senator would agree, when you add on the regulatory
costs and that family's share of higher interest rates because of the
national debt, you end up with another $9,000 coming out of the
checking account of the average family. It really takes it to over 50
percent, dealing with the cost of government.
Mr. THOMAS. I am sure that is correct. And it is an even more
astounding figure than we have.
It is set up so we do not think about it a lot. I do not object to
the idea of withholding. It is probably the only way to do it. But
withholding sort of slips in there and you hear people talking all the
time, ``Well, gee, I got money back.'' It is my money. It is my money.
Back from where?
Anyway, it is a very high figure. But it seems to me--and I wanted to
focus on this, and I am going to speak for just a few minutes about
this--it is too complicated, much too complicated, and too difficult to
figure. Again, an estimate is 4.5 billion hours a year are spent in the
preparation of tax returns. That is an astounding number as well.
Each of us knows how difficult it is to figure our taxes. They are
too hard to enforce. The more complicated, the more difficult it is in
the tax system, obviously it is more difficult to enforce. And
enforcement is important. You have to ensure that, when you have a tax
system, that everyone is treated fairly in that tax system, that
everybody contributes what under the law they are supposed to
contribute. So the tax system makes it most difficult.
Probably there are too many loopholes. They are often called
loopholes. The fact is, over time, the Tax Code has been used to affect
behavior. When we wanted someone to do something we changed the taxes
and made it an incentive to do it. So we have all these series of
things which have very little to do, frankly, with paying taxes. They
actually have very little to do with the fairness of taxation, but have
more to do, in fact, with seeking to modify behavior. Maybe that is a
legitimate function of taxes. But I can tell you, it makes it much,
much more difficult. It probably makes it much, much more unfair, in
terms of the total collection.
I think we had, this year, as an example, a real demonstration of how
frustrated people are when there was the kind of discussion and
acceptance, frankly, of the so-called flat tax. Obviously the most
attractive thing about a flat tax was the ease with which it could be
collected. There is argument about the fairness of it. Those who have
studied it feel it is even more fair. I do not argue with that.
Politically, it probably is not going to happen. There are some
things like homeowners' interest and those kinds of things that are
going to be very difficult, politically, to change. The argument is, of
course, if I am an investor in your company and you pay me a dividend,
that dividend has been paid after
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tax, so I should not have to pay it again on the dividend. But when you
see someone with a large income from dividends, politically that is
probably not going to happen.
Nevertheless, the point is, it was very attractive for Americans to
talk about a simpler, easier, more fair tax system, whatever it is. I
am no expert on that, but I think it must be possible to do that. It
must be possible to find a way to come up with a system that makes it
easier to enforce. So we get away from the idea of having an agency
like the IRS, that has to do the things it has to do. I am not being an
apologist for some of the behavior that IRS might use on people to do
this. But, nevertheless, the fact remains that they have a terribly
difficult job, to enforce this kind of a convoluted tax system.
So, Madam President, I think there are lots of things we could too. I
have a hunch, if we eliminated a lot of the exemptions, the lower rate
would offset some of the things that are now in there as exemptions. We
would find it would work better. I think collections would be higher if
it were simpler, and we would have fewer problems.
There are many reform and simplification ideas out there. Frankly, I
would support a plan, obviously, that deals with fairness. You have to
be fair as to whoever pays their fair share; simplicity ought to be an
issue, we ought to be able to make it much more simple, particularly
with some of the equipment that we have now. I think we ought to reduce
the burden. We have to pay for the Government we have, but we can do
with substantially less. We can do with shifting many of these
activities closer to home, so voters would know, when they made a cost-
benefit analysis. Expenditures at the Federal level are very difficult
to measure.
At home, in the school district, when they say we are going to have a
bond issue and we are going to build a science room and it is going to
take $400,000, then you say OK, is it worth it? Am I going to do it?
You have a cost-benefit ratio. How do you do that in the Federal
Government, tell me, in a $1.5 trillion budget where even people here
are not certain what is in the thing? So we can do that. And the result
would be to rein in the role of the Internal Revenue Service and we can
do that by simplifying, reducing, making easier a tax system.
Madam President, I hope that we do that.
I yield the floor.
The PRESIDING OFFICER. The Senator from Georgia.
Mr. COVERDELL. Madam President, I thank my colleague from Wyoming,
once again, for the contributions he makes in general to this Nation,
but I appreciate his being here this afternoon to talk about the issue
of the Internal Revenue Service and its broader implications on taxes.
As you know, Madam President, one of the centerpieces of Senator
Dole's economic plan is to focus on the IRS and how it interacts with
the American people.
I am going to read an article that recently appeared on June 7, 1996.
It refers to a General Accounting Office report on the Internal Revenue
Service, which I am going to quote from in just a moment.
This article says:
A congressional audit of the Internal Revenue Service
asserted yesterday that the agency that scrutinizes
taxpayers' finances cannot properly--
Cannot properly.
keep track of the $1.4 trillion it collects each year.
Given the stories--and all of us are familiar with them, of the way
taxpayers are treated from time to time by this agency --it is a bit
ironic that the General Accounting Office would say that they cannot
keep track of the money they collect.
It goes on to say:
``The agency that is so strict on the way Americans keep
their books cannot itself pass a financial audit,''
complained Senator Ted Stevens (R-AK) chairman of the
Governmental Affairs Committee. Stevens, reviewing the fiscal
1995 audit by the General Accounting Office, raised the
possibility of Congress appointing an outside control board
to run the IRS.
That is an interesting idea, somebody that they would have to be
accountable to, like the citizens have to be accountable to them.
He says:
It would be a board similar to the one overseeing the
District of Columbia Government.
In the House of Representatives, Representative Jim
Lightfoot (R-IA) chairman of the appropriations subcommittee
controlling the IRS budget, said an outside board would be
something worth considering.
And I certainly concur with that.
``Management has been a problem there,'' he said. The GAO
audit said fundamental persistent problems remain uncorrected
--
Madam President, uncorrected for the fourth year in a row. For the
fourth year in a row, these problems remain uncorrected. I am sure the
Presiding Officer, from time to time, has had to fill out her tax
returns and remembers that the agency did not allow the Senator 4 years
to work things out. They had to be done on a deadline date certain.
The IRS report said it cannot reconcile--
Let me just read from the report rather than this article. This is
the General Accounting Office financial audit, dated July 1996,
``Examination of IRS's Fiscal Year 1995 Financial Statements.'' It is
voluminous, but it says:
The following five financial management problems, which
have undermined our ability to attest to the reliability of
IRS financial statements for the past 4 fiscal years, provide
the basis for these conclusions.
1. The amounts of total revenue--
That's taxes.
$1.4 trillion and tax refunds, $122 billion, cannot be
verified or reconciled to accounting records maintained for
individual taxpayers in the aggregate.
2. The amounts reported for various types of taxes
collected--Social Security, income, excise taxes, for
example--cannot be substantiated.
3. The reliability of reported estimates of $113 billion
for valid accounts receivable and $46 billion for collectible
accounts receivable cannot be determined.
4. A significant portion of IRS's reported $3 billion in
nonpayroll operating expenses cannot be verified.
5. The amounts IRS reported as appropriations available for
expenditure for operations cannot be reconciled fully with
Treasury's central accounting records showing these amounts,
and hundreds of millions of dollars in differences have been
identified.
Madam President, if this was the report that an individual taxpayer
got--``cannot be reconciled,'' ``cannot be verified,'' ``cannot be
determined,'' ``cannot be identified''--that taxpayer would be in a
world of hurt and trouble. It would be unthinkable that you could
engage this agency and have them finding that you could not reconcile
your records, you could not determine what your income was, you could
not put anything together, you could not account for it. You would be
in deep trouble.
This agency needs to reflect on that. There are over 100,000
employees, and we know they are very dedicated employees, but this is
unconscionable that they would receive a report like this and demand
the kind of adherence to specificity and to timing that they ask of the
American citizens but do not subscribe to themselves.
This issue of the Internal Revenue Service has taken on new
proportions of late, because Representative Jennifer Dunn of Washington
in a speech made a remark that basically said the agency ought to
adhere to standards that it demands of people. And I just talked about
that. The Government findings are that the agency can't manage its own
affairs to the extent that they are demanding of the American people.
We have been in a discussion this afternoon about the Internal
Revenue Service. I have alluded to the General Accounting Office this
year has found grave fault with this agency and the manner in which it
maintains its own financial records.
There are even suggestions in both Houses now for a control board to
oversee the agency. I pointed out very recently this issue has been
elevated because Congresswoman Dunn, Jennifer Dunn, from Washington,
had said, you know, the agency ought to be held to the same kind of
standards that the American people are held to. And that irritated the
agency. And the agency indicated, in a letter to Ms. Dunn, among other
things, by Margaret Milner Richardson, who is the Commissioner of the
Internal Revenue Service--she said she was dismayed and confused to
hear this Congresswoman suggest that there was something less than
perfect going on at the Internal Revenue Service. And she goes on to
say, ``Taxpayers now pay about 87 percent of what they owe.
Noncompliance is a serious problem that deprives our
[[Page S10548]]
Government of more than $90 billion in revenue annually.''
I am sort of curious, how do they know? How does the Internal Revenue
Service know what legitimate taxes are not being paid? The tone of this
suggests, ``These American citizens out here, we need to be watching
over them, make darn sure they pay what they are supposed to pay!'' It
is kind of like all of our citizens are looking for a way to defraud
the American Government, for Heaven's sake.
I will read this report and then I will turn to my colleague from
Utah. This is a copyright 1994 News World Communications, Inc., the
Washington Times, August 2, 1994. The headline of the article, ``IRS
Bullies.'' ``Last week the House was debating discharge position 12
which would ensure that the taxpayer is innocent''--not guilty, as this
might suggest--``is innocent until proven guilty.''
We have two sets of laws in America: You are innocent in America
until you are proven guilty, but that is not always the case if you are
dealing with the IRS.
About the same time, ``Inside the Beltway'' disclosed for the first
time Washington lawyer, Susan Allen's incredible encounter with John
Richardson, the husband of Internal Revenue Service Commissioner
Margaret Richardson, who wrote this letter to Congresswoman Dunn:
Mr. Richardson, the lawyer told us, had parked his black
Volvo across an alley driveway leading from her Northwest
home, preventing her from driving out of her garage. When Mr.
Richardson was summoned from a nearby restaurant, she said he
huffed, ``Margaret Richardson'' [that is the commissioner of
Internal Revenue Service] ``is my wife, and she is the IRS
commissioner, and I hope you paid your taxes.'' The surprised
lawyer couldn't believe her ears, so Mr. Richardson gladly
huffed again: ``My wife is the commissioner of IRS and I hope
you paid your taxes.''
We have an attitude issue here, Madam President. It is not just this
agency. About 85 percent of the people that come through my office are
concerned, in one way or another, about the treatment they receive from
their Government. I grew up thinking the Government was supposed to be
a partner, not a bully or a boss. I think these things deserve some
serious attention.
We have been joined by my colleague from the good State of Utah. I
yield up to 10 minutes to the Senator from Utah.
Mr. BENNETT. Madam President, I have two points to make with respect
to the IRS.
Let me preface this by saying that the IRS has a large facility in my
State, in Utah, in Ogden, and by and large the overwhelming majority of
the people who work in that facility are honest, hard-working,
dedicated Americans who are as anxious to do a good job as anybody in
any other agency.
I learned when I was in the business world that when something is
wrong, seriously wrong with an organization, it is usually not with the
people. It is usually with the system that they are operating and with
the culture.
I wish to make two points about the IRS system and culture, with the
understanding that I am not criticizing hard-working, dedicated
individual civil servants who are doing the best they can in a
difficult circumstance.
First, the system. Rather than discuss individual horror stories--I
will get to that when I talk about culture--I want to go to formal
examinations of the IRS that are before us as Members of Congress and
call the attention of my fellow Senators and others to two reports. One
is from the GAO, the General Accounting Office, that came out in August
of this year. It says ``Tax Systems Modernization.'' That is the
standard headline, but look at the subheadline that is right there on
the front of the report. It says, ``Cyberfile Project Was Poorly
Planned And Managed.''
Then on the heels of that, in September 1996, hot off the presses, if
you will, the General Accounting Office ``Internal Revenue Service'';
the subhead, ``Business Operations Need Continued Improvement.''
These were both submitted to the Governmental Affairs Committee, the
chairman of which, Senator Stevens of Alaska, has shared them with me.
Let me give a summary of what is in these reports. Again, I look at
this as a businessman, and I must say, Madam President, I am appalled.
The IRS has not passed an audit during the 5 years they have been
audited. Their major failures are they cannot account for revenues from
tax returns and refunds. They cannot account for goods received against
payments made, and there are computer security weaknesses that have
allowed IRS workers to view and alter returns. Think of the movies we
have seen of the hacker getting into the system. Well, IRS employees
can get into the system and not alter grades the way they do in the
movies or set off nuclear wars, but at least alter the returns of some
of their friends, if they want to.
The recent GAO audit found that interim computer security procedures
have been improved, but these weaknesses still remain. The amounts of
total revenue, $1.4 trillion, and tax refunds, $122 billion, cannot be
verified or reconciled to accounting records maintained for individual
taxpayers in the aggregate. In other words, we have a business here
that for 5 years has been unable to close its books because they cannot
bring them into balance. They cannot reconcile the numbers on this side
with the numbers on that side. I find that astounding--5 years and they
still cannot reconcile the amounts of total revenue and tax refunds to
their accounting records maintained for individual taxpayers. I wonder
how forgiving the IRS would be in an audit of a business that said for
5 years we have been unable to reconcile these amounts.
Next, the amounts reported for various types of taxes collected--for
example, Social Security and income taxes and excise taxes--cannot be
substantiated.
Next, the reliability of reported estimates of $113 billion for valid
accounts receivable and $46 billion for collectible accounts receivable
cannot be determined.
Next, a significant portion of IRS's reported $3 billion in
nonpayroll operating expenses cannot be verified. The amounts IRS
reported as appropriations available for expenditure for operations
cannot be reconciled with the Treasury's central accounting records
showing these amounts. The differences are in the hundreds of millions
of dollars. Again, how would the IRS react to a company that showed
differences in accounts between one division and the other that were
hundreds of millions of dollars in size, and was unable to reconcile
them?
Now, the reason the IRS says it is so difficult for them to pass an
audit on these issues is that they were never required to do so until
the Chief Financial Officer Act was passed. Therefore, they say their
financial management systems and procedures were never set up to be
audited.
This is incredible. For 5 years, they have been unable to pass an
audit. They cannot reconcile their accounts, either internally, or with
the Treasury. Yet, they ask us to have a high degree of confidence in
the way they handle our taxpayers' money. So that is my first point
with respect to the structure.
Now, if I may, I will talk about the culture of the IRS. As my
colleague from Georgia has done, I will use examples out of my own
office as a Senator. Here is one.
A taxpayer pays the tax he figures he owes; he sends the tax in to
the IRS. The payment sits there for a year and a half, and he hears
nothing back. Then, for some reason, the entire amount he paid is sent
back to him, with no explanation. The IRS simply sends it back after a
year and a half--no explanation, no indication. Two days later, they
send him a notice saying that he owes tax for that year at a lesser
amount than the amount he had sent them and demands that it be paid
immediately. And then, a few weeks later, a notice comes that interest
and penalty are now due on the tax that he just paid. He pays the tax,
they keep it for a year and a half, send it back to him, with no
explanation, then send him a new tax bill. He pays that, and he is told
he owes interest and penalty on the new tax bill because he hadn't paid
his taxes on time a year and a half before. Well, he thinks, surely,
when he explains this, somebody will straighten it out. He goes to the
IRS and gets no assistance whatsoever. He was told he owed the interest
and penalty, and if he did not pay it, the penalty would continue to
accrue.
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Finally, he came to my office. My constituent liaison person made
inquiry with the local IRS people and was told there is no way,
legally, to cancel the interest and penalty in this case. Well,
fortunately, the members of my staff are as persistent as I would hope
they would be. They did not accept that as an answer and, ultimately,
the case was resolved. But what does it say about the Agency when it
takes the muscle a U.S. Senator to get them to resolve something that
is so absurd, as this was?
The second case, which is not an individual case but a series of
cases that we see--and I would assume that my colleagues see--in our
offices often as well. Homemakers, women in marriages that go along for
a while, and then they don't work out. They always filed joint returns.
The husband fills out the joint return, signs it, hands it to his wife,
says, ``Sign it here, I am sending off the tax return.'' They sign it
without really understanding what is going on. And then the marriage
breaks up, a divorce takes place. The woman has to find a job. She goes
out and gets a job, only to discover that her wages are now being
attached by the IRS for back taxes that her husband never paid. He did
not tell her that he wasn't paying them. He, indeed, lied to her and
told her they were being paid and they were all taken care of. She was
being defrauded by her husband. But instead of coming after the
husband, the IRS comes after her. Why? Because she is the one working.
The husband disappeared. She is working and she has to put her life
back together. Many times children are involved that she has to
support. But instead of saying, yes, we recognize that in the situation
you were in before, you, in fact, had no control over the family
finances, they are now saying, no, because you signed that return, you
are due for those taxes because we can't find your husband.
Even in those cases where the woman can prove she did not sign the
return, the husband signed her name, forged it, the IRS says, no, your
name was on there, there was a signature, and you are coming into the
work force, trying to put your life back together, trying to take care
of your kids, and you are now responsible for the taxes that your
former husband refused to pay. The women in these circumstances feel
intimidated, scared, frustrated and, above all, confused.
We had one who finally came to my office asking for assistance
because the collection officer was abrasive, intimidating, and
demanding. Once again, it was only after my congressional liaison
person got involved that this woman got some degree of relief from
this.
So those are the two points I leave you with, Madam President. First,
the system, as indicated in these two reports, has very serious
systematic problems--trillions of dollars, and they can't make their
books balance, internally or with the Treasury books. Second, the
culture, where IRS agents find themselves intimidating and demanding,
and where ordinary citizens are seeking some kind of redress and
protection and ultimately come to Members of the U.S. Senate for help.
One final comment. I don't know how true this is of other Senators. I
am one who has gone through an IRS audit. I found it a relatively
painless kind of experience. I was fully prepared. The individual on
the other side recognized that, and we went through things in a civil,
proper fashion, and I commented on that to another friend, saying I had
been through an IRS audit, and it's not all that bad. He looked at me
and he said, ``Bob, it is entirely the luck of the draw. It depends on
which agent you get that day. You were lucky enough to get the
intelligent, properly motivated, properly directed, dedicated civil
servant. I got the other kind. I can tell you, it depends on which one
is on duty when your number comes up.''
It should not be that way, Madam President. We should have equal
justice under the law, and everybody should be treated the same.
I yield the floor.
Mr. COVERDELL. Madam President, I thank the Senator from Utah for his
very revealing comments. He was on target. I appreciate very much him
joining us this afternoon. I am now going to yield up to 10 minutes to
my colleague from Minnesota.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. GRAMS. Madam President, when 2,000 American job providers came to
Washington last June to attend what was called the Third White House
Conference on Small Business, they brought with them hundreds of ideas
on how to make Government more responsive--to the taxpayers and to
small business alike.
They condensed their suggestions into a list of 60 to send on to the
White House. Even though their recommendations covered a tremendous
range of concerns, one point generated near universal agreement from
that conference, and that was that something must be done about the
complex and costly Federal tax system.
Well, there's nothing simple about taxes anymore, as you have heard
here today. As any taxpayer will tell you, the IRS today is five times
bigger than the FBI, and it's twice as large as the CIA. To run such a
massive operation takes the equivalent of more than 3 million full-time
employees. We have more Americans collecting taxes than we have serving
in the Armed Forces.
The IRS manages a library of 437 separate tax forms. The IRS mails
out over 8 billion pages of tax instructions every year.
Now, our colleague in the House, the distinguished majority leader
from Texas, points out that American workers and businesses spent 5.4
billion hours in 1990 just preparing their taxes. That is more time
than it takes to build every car, truck, and van that is manufactured
in the United States every year. Just to administer a tax system so
unwieldy costs our taxpayers almost $14 billion a year.
Even though the IRS demands strict compliance from the American
people, it has set far lower standards for itself, as our colleague
from Utah points out. It has long permitted itself severe abuses within
its own accounting practices--something they would not tolerate from
businesses or individuals.
In a report issued last year, the General Accounting Office took the
IRS to task for failing to keep its own books and records with the same
accuracy that it demands of the taxpayers.
For the last 2 years, in fact, the GAO has not been able to express
an opinion on the financial statements of the IRS, and that was due to
serious accounting errors and internal control problems. More than 20
months later, the problems still remain.
In testimony before Congress in June, Gregory Holloway of the GAO
reported:
We have made 59 recommendations to improve the IRS's
financial management systems and reporting. IRS agreed with
these recommendations and has worked to implement them and
correct its financial management systems and information
problems. However, many of the more significant
recommendations have not yet been fully implemented.
There are other ways in which the management problems within the IRS
are manifesting themselves. And far too many of my constituents are
forced to deal with the fallout on a daily basis.
Madam President, every American has experienced the frustration of
filing their Federal tax returns. Even though Congress has tripled
funding for the IRS over the last 7 years to the tune of $7.5 billion,
the level of service provided to the taxpayers has not grown
proportionally. In recent years, the IRS has invested billions of
taxpayer dollars in its efforts to modernize its operations, including
its information systems--but the GAO has dubbed the results
``chaotic.'' As an ironic consequence, the IRS, the Nation's tax
collector, is perhaps the least taxpayer-friendly agency in the entire
Federal Government.
Meanwhile, the Federal tax system continues to grow more complicated
and hard to understand. In the mid-1950's, the Federal Income Tax Code
was comprised of 103 sections and 400,000 words.
Today, it has ballooned to 698 sections--a 578-percent increase--and
nearly 1.4 million words.
Adding to the aggravation of the Nation's taxpayers, tax regulations
have multiplied just as rapidly.
Between 1955 and 1994, the number of words in the regulations of the
Internal Revenue Code increased more than 550 percent, from just over 1
million words to 5.7 million in the IRS Code.
Even if you are a trained speed reader who can read 1,000 words a
minute, and you did not do anything else but
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devote every hour of every business day to reading these regulations,
it would take you almost 3 years to wade through them.
The rapid growth of the Federal Tax Code and its regulations has
dramatically increased the complexity of our tax system, to the point
where no one but a very few tax specialists can understand it. Even IRS
agents are often confused by their own tax laws. The complexity of the
Federal tax system means that tax assistance for ordinary American
taxpayers is even more urgent now than ever before.
But this desperately needed assistance has not been adequately
provided. For example, my State office receives complaints daily from
constituents frustrated they cannot get through to a human being at the
toll-free lines established by the IRS: The lines are constantly busy.
In some cases, my constituents have tried for 3 or 4 days before they
finally reached a real, live person.
In July, I received this letter from a taxpayer in St. Paul who was
being threatened with a lawsuit by the IRS:
I am one of those middle-age, lower-middle-class citizens
who have pulled myself from extreme tragedy to the point
where I am trying to buy my house, I've never had the
government or any agency help me.
And now my entire life is threatened because I can't talk
to a human being about my taxes. Please help me. I have sent
a copy of this to the IRS, the White House, Senator
Wellstone, and no one seems to be able to help. I can't
believe that I cannot find a human being in the IRS to talk
to.
Another constituent of mine who tried repeatedly to reach someone at
the hotline shared their frustration with the IRS operator when their
call was finally answered. ``Blame it on Congress. They cut our
budget,'' said the operator. The IRS employee ended the call by
advising my constituent to telephone me and demand more tax dollars for
the IRS.
Let us go back over that again. He finally got through after days and
was finally able to talk to an operator at the IRS. And the answer he
got was ``Blame it on Congress'' because ``they cut our budget.'' And
before he got off the phone the operator, the IRS person, told them to
call me in Washington and demand more money for the IRS.
I suggest, Madam President, that throwing more dollars at an agency
that already cannot account for $1.4 trillion tax dollars it takes in
annually is hardly the solution.
The Federal Government enacts laws that we require the people to
obey. But in the case of the IRS telephone hotline service, we have
failed to provide sufficient assistance to enable average Americans to
understand and comply with the laws.
And when innocent incompliance occurs due to the complexity of the
tax system, we punish the taxpayers by imposing all sorts of penalties.
This is simply not fair.
Let me give you two examples. A certain individual in Minnesota told
me about a problem he had. He paid about $35,000 in taxes but didn't
file his return until October. But he had filed all the necessary
extensions that he needed to file to get the extension on his return.
The IRS had already collected about $35,000. But he was still short
about $4,000, which he paid plus interest. But even after paying all
those taxes he still was find $700 for being late.
Another individual that is self-employed told me that he pays his
taxes every year quarterly estimating his taxes, and at one time he
received more money in payments from his clients than he expected, and
when he paid taxes on that, IRS came back and fined him $500 because he
had failed to report that correctly.
Madam President, I do not know if that is fair, or what is intended
when we have taxpayers out there trying to meet the laws, obey the
codes, and yet are fined by this agency.
Madam President, I am pleased the Senate took action this week to
resolve this most frustrating situation by accepting my amendment to
the Treasury-Postal appropriations legislation. The amendment will help
correct the problem by making the IRS prioritize its toll-free
telephone service and allocate the necessary resources to ensure that
taxpayers receive adequate assistance and answers to their questions.
This will not solve most of the problems plaguing the IRS, of course,
but it marks a start. I am happy to see additional solutions being
proposed, and I am especially pleased that our former majority leader,
Bob Dole, is speaking loudly about our need to forever end the IRS as
we know it.
He has pledged to ``free the American people from tax tyranny,'' and
the ideas for IRS reform he has put forward in his economic blueprint
have raised the level of this debate.
They deserve a close look by the taxpayers, as we seek to build an
IRS that will be a tool for the taxpayers, not a weapon against them.
Thank you very much, Madam President.
Mr. COVERDELL. Madam President, when Senator Dole left the Senate, I
looked down at this desk, and I said that I would ``never forget or
look at this desk without seeing him or thinking of him.''
He is now engaged in a very long journey. As the Senator from
Minnesota just alluded to, he put forward a very broad economic plan
that deals with the IRS that we have just been discussing, along with
other policies such as the 15-percent across-the-board tax break, and
others.
Yesterday, my good colleague from Nebraska came to the floor--and, of
course, he was the longest serving Governor of Nebraska, and he has
been in the Senate 18 years--and I was taken aback by his comments
about Senator Dole.
Just to quote here, he calls it:
The latest ``Follow the Yellow Brick Road'' path of
wizardry blends $550 billion in tax breaks, unspecified
spending cuts, and rosy economic scenarios into one shameless
political ploy. When the unsuspecting Dorothys of the world
pull back in wonderment the curtain, they discover a huffing
and puffing candidate, Bob Dole, as the wizard. This is the
same wizard who for the first 72 years of his life forswore
such economic nonsense. Bob Dole's transformation from a
deficit hawk into a carrier pigeon for supply * * *
Well, anyway, I just do not think those kinds of remarks are fitting
in public discourse, and certainly here in the Hall of the greatest
legislative Chamber in the history of the world I do not think they are
fitting remarks. We can debate our differences about our views on tax
relief and economic policy without resorting to this kind of language.
I do not think it is fitting for the Senate, and I wanted to say so
here rather than off in some klatch someplace.
The Senator from Nebraska went on to ridicule the economics of the
1980's which, I might point out, was the longest peacetime economic
recovery in the history of the United States. He apologized to America
for having supported the Reagan tax cuts, and he said it was worst vote
he had ever cast and a mistake.
I find it hard to characterize beginning the longest peacetime
recovery as a mistake; or ending double-digit inflation, which had been
13 percent, he now characterizes trying to correct that and correcting
that as a mistake; getting interest rates down--people do not remember
but they were as high as 22 percent, and this economic recovery, of
course, reduced it dramatically, but he characterizes that as a
mistake; or was creating 20 million new jobs in that glorious decade a
mistake, as he characterizes it and regretted having ever voted to
support it; or rebuilding our national defense and economy, winning the
war over communism, ending the cold war, and he characterizes that as a
mistake.
Madam President, right now I talk a lot about the American family. I
do not think we can talk enough about them. In my State, after they pay
their Federal taxes, State taxes, local taxes, their share of the
increased interest on the national debt, their share of the costs of
the burden of regulation in America which is now $7,000 for an average
family of four, they have less than half the money they earn in their
checking account. They are left with only 47 percent of their wages--
unbelievable. No wonder there is much anxiety and pressure and worry in
middle-income families of America.
This administration which promised to lower that pressure--it was a
very major political statement to the country--really did not get its
bags unpacked before it imposed a $491 billion tax increase--the
highest in American history.
Madam President, $491 billion, what does that mean to this family I
was
[[Page S10551]]
just talking about? It means that they lost in the last 3 years
somewhere between $2,000 and $2,600 per year less in their checking
account which was already under duress.
The result of this tax increase is that we now pay 30.4 percent of
the gross domestic product in taxes. This is the highest that it has
ever been in American history. The tax burden has never been higher,
and under the current economic plan as proposed by President Clinton it
will rise to its highest level ever, 19.3 percent of the gross domestic
product.
The point I am making here is that for Senator Dole to come forward
and say we ought to lower this burden, it means that this family that
has lost $2,000-plus per year under the 15 percent across-the-board tax
relief will get about $1,200 to $1,400 of that back. That makes a lot
of sense. If a family cannot even keep half the wages they earn, I
think it is sound policy to try to reverse that and get some of those
resources back in that family's checking account so that they can see
to the raising of the children, the education, the housing,
the transportation, the food, all of that which we depend on the
American family to do. We have made it almost impossible for the
American family to do that which they are supposed to do.
In addition, that plan embraces a balanced budget amendment to the
Constitution. I might point out that Senator Exon of Nebraska was one
of the seven that changed his vote which caused the failure of passage
of the balanced budget amendment to the Constitution.
Senator Dole has embraced that. We have talked about the IRS here,
saying we are going to get into that agency and produce a cultural
attitude that is consistent with being a partner to America and not a
boss over America, saying that you are going to balance the budget by
the year 2002 which will lower interest rates--it will lower what this
American family has to pay on the mortgage for their home, car,
refrigerator, their credit card.
All of these proposals make a lot of sense, and it is all right that
we disagree and debate about the conditions of these, but we ought to
do it in a very civil and appropriate way. There ought not to be any
name calling on either side of the aisle. The American people expect
that of this body.
In closing, Madam President, I cannot think of any policy that is
more important for our working families than to try to get this burden
down to a more rational level. If you ask all our families, it does not
matter what walk of life they come from, what their income strata is,
their education, they all say that the appropriate tax burden should be
about 25 percent. It is double that. And so I think Senator Dole's
suggestion that we ought to pass a little relief back to those family
checking accounts makes every bit of sense.
Madam President, I ask unanimous consent that in the intervening time
on the schedule, the Senator from Minnesota be added to the end of our
time. I think it will take us until about 2:17, or something like that.
The PRESIDING OFFICER. Without objection, it is so ordered.
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