[Congressional Record Volume 143, Number 45 (Wednesday, April 16, 1997)]
[Extensions of Remarks]
[Pages E672-E673]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                THE IRS

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                       Wednesday, April 16, 1997

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, April 16, 1997, into the Congressional Record:

                       The IRS: Overhaul Overdue

       More than 200 million individuals and companies recently 
     sent their tax returns to the Internal Revenue Service. This 
     yearly ritual--and the frustration that surrounds it--makes 
     the IRS the most vilified agency in the federal government. 
     Of course, tax collectors have been criticized since biblical 
     times. No one expects the IRS to be popular, and fair-minded 
     people understand the difficulty of collecting taxes. But 
     American taxpayers have a right to expect fairness and 
     efficiency from their tax collectors.
       The IRS is widely recognized to be inefficient. In the 
     previous fiscal year, 74% of all telephone calls to the IRS 
     got a busy signal. The IRS still enters paper returns 
     manually into computers, with a 20% error rate. Because its 
     computers are out of date, the IRS focuses on processing 
     instead of fraud. It is no wonder, then, that millions of 
     suspect returns go unexamined. When it does investigate, the 
     IRS is not always held accountable for investigations that 
     are unfair or overly intrusive. I am most troubled by 
     allegations that some IRS employees ``snoop'' through tax-
     payer records without authorization. Any employee who does so 
     should be fired immediately. The IRS is long overdue for a 
     massive management overhaul.


                            Formidable Task

       In 1996 the IRS collected $1.5 trillion from more than 200 
     million individual and corporate taxpayers. The IRS computer 
     system is the largest in the world, and it is difficult to 
     find highly-skilled computer experts who will work for 
     government salaries. Today the IRS collects about $150 
     billion a year less than what the law requires. Strengthening 
     enforcement, however, can sometimes require more intrusive 
     measures that would be rejected by taxpayers and Congress. If 
     is difficult to strike a proper balance.
       These challenges are not new, and Congress has pushed the 
     IRS to modernize for years. A few years ago, Congress created 
     a Taxpayer Advocate and authorized a computer modernization 
     project. Unfortunately, the IRS spent $4 billion to create 12 
     computer systems that can't even talk to each other. This 
     failed effort is an outrageous symbol of the mismanagement 
     that has pervaded the agency.


                           signs of progress

       The IRS is beginning to make some improvements. About 70% 
     of individuals taxpayers use the one-page ``EZ'' tax form, 
     and other forms have been simplified. The IRS takes 45 
     million toll-free calls per year. Taxpayers still complain 
     that they cannot get a real person to speak to them on the 
     telephone, but when they do, they now get the correct answer 
     91% of the time, up from 63% in 1989. The IRS is also 
     beginning to move to automated returns. The new telephone 
     filing service is used by 17 million people; 15 million use 
     computer filing. Taxpayers who file automatically get their 
     refunds in an average of 16 days, compared with 38 days for 
     paper. Moreover, the error rate on automated returns is just 
     1/40th of the paper rate. The popular IRS internet site 
     (www.irs.ustreas.gov) provides tax forms and answers to 
     frequently asked questions. I commend these steps, but they 
     still fall short of the efficiency and fairness taxpayers 
     deserve.


                             Major Reforms

       The last major reform of the IRS took place in 1952, when 
     the agency was riddled with political appointees and was 
     widely corrupt. Today's task is more of a management 
     challenge.
       Last year, Congress established the National Commission on 
     Restructuring the IRS to issue a report by July 1. This 
     commission has set six objectives: (1) The taxpayer deserves 
     superior, courteous service; (2) the IRS management structure 
     needs to be revamped; (3) the IRS workforce should be the 
     highest quality; (4) the agency needs state-of-the-art 
     technology; (5) the IRS must balance its books; and (6) the 
     tax code should not be so complex or change so often.
       I think there are several specific steps we should take.
       Independent Board: The IRS should have an independent board 
     of directors. This board would set goals and hold the IRS 
     accountable for reaching them. A similar board was recently 
     set up for IRS computers, and it boosted private contracting 
     from 40% to 64%. this trend should continue.
       Experienced Commissioner: Top leaders of the IRS should 
     have management experience. In the past, Commissioners have 
     been tax lawyers, but we should ensure that top managers know 
     how to manage a large organization.
       Reduce Complication: Congress should be forced to consider 
     the complexity of all proposed changes before they are 
     enacted. Many proposed tax measures sound attractive, but 
     they only add to the growing complexity of the tax code. It 
     is easier for Congress to support tax credits for education, 
     investment, and other worthy goals than it is to simplify the 
     tax code.
       Crackdown on Fraud: The IRS must reduce fraud. The IRS has 
     made many attempts to strengthen tax compliance and 
     collection, but more needs to be done. A more efficient 
     processing system will free up resources to strengthen 
     enforcement. The IRS should improve its enforcement while 
     protecting taxpayer privacy.

[[Page E673]]

       Electronic Filing: The IRS should develop a plan to make it 
     convenient for virtually all taxpayers to file 
     electronically. We should not be spending taxpayer dollars on 
     antiquated processing.
       Restructuring: The IRS should be realigned by types of 
     taxpayers: individuals, small businesses, large corporations, 
     and excise taxes. Now, the IRS is separated into collection, 
     processing, service, and auditing--divisions that don't work 
     well together.
       Amnesty: Taxpayers should not be liable for IRS mistakes. 
     When the IRS gives taxpayers bad advice, they should not be 
     penalized for following it.


                               Conclusion

       The IRS is facing serious management problems and needs a 
     comprehensive overhaul. Taxpayers have a right to demand more 
     from the IRS. Talk of eliminating the IRS is largely 
     political: as long as the federal government requires 
     revenue, we need a way to collect it. But the IRS should be 
     fair and efficient, and Congress must move forward on major 
     IRS reform.

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