[Congressional Record Volume 143, Number 44 (Tuesday, April 15, 1997)]
[Senate]
[Pages S3227-S3228]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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                     THE IRS AND TAXPAYERS AT RISK

 Mr. THOMPSON. Mr. President, on the final day for taxpayers to 
file their tax returns, I think it is appropriate for Congress and the 
American people to assess how well the Internal Revenue Service [IRS] 
is doing managing the collection of 1.4 trillion taxpayer dollars. 
Unfortunately, the answer is not very well. The Committee on 
Governmental Affairs held a hearing last week on the IRS programs on 
the General Accounting Office's [GAO] high risk list which identifies 
those Federal programs most vulnerable to waste, fraud, abuse, and 
mismanagement. To the taxpayer's dismay, the IRS made the list six 
times. IRS programs have been consistently on GAO's high risk list 
since its inception in 1990 and GAO has issued over 200 reports in the 
past 5 years critical of the problems at IRS.
  The problems at IRS are considerable. For example:
  IRS still can't pass an audit--something that the private sector has 
been doing since the 1930's and State governments since the 1980's. 
Because IRS' financial statements are so poor, it is likely the entire 
Government will not be able to pass its first congressionally required 
audit of its financial statements this fall. Shouldn't IRS live up to 
the same accounting standards it imposes on the taxpayer?
  For three decades IRS has been attempting to overhaul its outdated 
1960's era computer systems. In its third unsuccessful attempt at 
modernization, IRS has spent over $3 billion, with very little to show 
for it. This has become a case study in how not to buy computers.
  In the area of tax collections, GAO finds that IRS has no real basis 
for determining how much it is owed or, in any comprehensive sense, by 
whom. This is important because every dollar owed which is not 
collected due to inaccurate filing or ineffective collection comes out 
of the pocket of every honest taxpayer.
  Despite an IRS pledge to have zero-tolerance for snooping by IRS 
personnel through taxpayer's files, GAO finds that the practice 
continues. Only one IRS computer system has a very limited ability to 
detect snooping. As for the rest of IRS systems and paper files there 
are few controls to protect sensitive taxpayer records from this 
invasion of privacy.
  All of IRS' computers are at risk of not operating properly on 
January 1, 2000, because of the antiquated computers' inability to deal 
with the year 2000 date change. In less than 1,000 days, the collection 
of revenue and the entire tax processing system will be in jeopardy.
  It is estimated that $200 billion is lost each year to fraud and 
nonpayment of taxes. While IRS caught $131 million in fraudulent 
returns in 1995, GAO lists filing fraud as a high risk area and it is 
uncertain how many fraudulent returns slip through the system.

  But these concerns are even surpassed by new ones raised by GAO in 
January in a confidential report on IRS security weaknesses which is 
now being released in very restricted form. IRS has very serious 
physical and information security problems which jeopardize its ability 
to function and puts taxpayer data at risk of being improperly used, 
changed, or destroyed. It should concern us all that GAO's findings of 
IRS' vulnerability to security

[[Page S3228]]

threats are of such great concern that most of the original report can 
not be made public.
  What is at stake here? The confidence of the taxpayer is at stake. 
Tax laws must be fairly enforced at the least possible cost and 
personal intrusion and IRS must meet the standards it expects the 
taxpayer to meet.
  Our credibility as the steward of the money we ask the taxpayer to 
contribute is at stake. Each dollar the Government collects is a dollar 
someone else has earned. It is our obligation to make the best use of 
that dollar, and not waste a cent of it.
  Finally, at stake is the very ability of government to perform its 
necessary responsibilities and functions. Without taxpayer confidence 
that we are collecting money fairly and wisely, our system of 
government is crippled.
  Taxation in this country has a long and tumultuous history. We are a 
nation founded on a tax revolt and are continuously renewed by a 
healthy skepticism toward all forms of taxation. It is important to 
remember that it is only with the American people's consent that the 
IRS exists in the first place.
  As a nation we collect taxes to pay for the responsibilities we have 
assigned to our Government. Right over the entrance to the IRS are the 
words of Oliver Wendell Holmes: ``Taxes are the price we pay for a 
civilized society.'' But, recognizing the need to fund government 
responsibilities does not imply that we should continue with business 
as usual at the IRS. If an agency fails in its fundamental mission, or 
fails to keep its promises to Congress and the American people, we need 
to be prepared to make fundamental changes. I, for one, favor greatly 
simplifying the Tax Code. A simpler code, fairly administered, will 
help to restore the taxpayers' faith in the system. It will also make 
the system more manageable.
  In the meantime, it is imperative for IRS to improve its operations. 
It is outrageous that IRS programs put on GAO's high-risk list remain 
there year-after-year. GAO testified before the Governmental Affairs 
Committee in June of 1991 and described key areas in which IRS needed 
to improve its operations. Six years later, we heard virtually the same 
message in the same areas from GAO. What has IRS been doing in the last 
6 years? What has been done to correct systemic management problems at 
IRS?
  Fortunately, the forces for change may now be coming into place. 
Congress has used its power of the purse to express its dissatisfaction 
with IRS' computer modernization. A new Commission to Restructure the 
IRS has been formed to address how the Nation collects taxes and the 
administration has announced a new plan for reform at IRS. The Deputy 
Secretary of Treasury Lawrence Summers, testified before the 
Governmental Affairs Committee last Thursday on this plan. The 
administration's recognition of many of the problems it faces is a good 
first step. However, it is unclear how establishing new layers of 
bureaucracy will improve the situation at IRS. We also need to 
understand how giving IRS greater personnel and budgetary flexibilities 
would enable it to better manage its programs and finances.

  It is necessary for Congress and the administration to work together 
to reform the IRS. As for the next step, the Congress needs more 
details on the administration's IRS reform proposals. I plan to work 
with my colleagues to ensure that a detailed plan is sent to Congress 
as soon as possible to address the IRS' high risk problems. This reform 
plan should be linked to IRS' GPRA strategic plan and should include 
specific performance measures that will successfully address IRS' high-
risk areas.
  Congress is also taking up today legislation on criminalizing the 
snooping by IRS employees of confidential taxpayer data. This is an 
issue with a longstanding history at the Governmental Affairs 
Committee. The issue was first brought to light during financial audits 
under the Chief Financial Officers Act. In 1994, it was thought that 
IRS would address this issue in a comprehensive manner. At last week's 
hearing, GAO found that snooping was still a significant problem. All 
of us are greatly disturbed about reports of lax security and the 
unauthorized browsing by IRS employees of taxpayer information. This 
invasion of privacy is a breech of public trust and only further lowers 
the faith of the taxpayer in the fairness of the system.
  I want to work with the administration and other congressional 
committees to implement lasting solutions to identified management 
problems at IRS and reduce the risks to the taxpayers. Most of these 
problems have existed for years. I recognize that this administration, 
and previous ones, have tried to solve them. But, time is growing 
short. The confidence of our citizens is low and the risks are 
high.

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