[Congressional Record Volume 143, Number 128 (Tuesday, September 23, 1997)]
[Senate]
[Pages S9776-S9777]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             NFIB CAMPAIGN TO ABOLISH THE IRS CODE BY 2000

  Mr. DOMENICI. Madam President, in 1990 Senator Nunn and I cochaired 
the Strengthening of America Commission which among its 
recommendations, called for abolishing the current income tax code, and 
replacing it with a progressive consumption-based income tax code that 
would encouraged savings and investment.
  The National Federation of Independent Business is in Independence, 
MO, today starting a nationwide petition drive that encourages all 
small business owners to sign a petition calling upon the President and 
Congress to abolish the IRS Code as of December 31, 2000 and to replace 
it with a simpler, fairer tax code which will reward work and savings.
  I intend to sign this petition and encourage all of my colleagues to 
do likewise.
  NFIB is launching the petition drive in Independence MO, home of 
President Harry Truman, who said, ``The Buck stops here.'' NFIB is 
telling the American public that ``the code stops here.''
  NFIB could have started their campaign in the town of Truth or 
Consequences, New Mexico. When dealing with the IRS, ``tell the truth 
or pay the consequences'' could be their motto.
  But things have gone wrong. Compliance has become lax or nasty.
  Despite a $7 billion in annual budget and 106,000 employees the IRS 
failed to collect an estimated $200 billion of taxes a year.
  Tax collection is as nasty as it is lax.
  In New Mexico, there is a sense of frustration among people trying to 
comply. Taxpayers receive computer generated letters. The letter is 
either a short, brutish demand for more money or an incomplete and 
unclear request for more documentation The letters usually include no 
phone number, and no contact person. Now, that is actually from my 
staff working with constituents. The letters usually include no phone 
numbers and no contact person.
  The letter strikes fear. The message is clear--TRUTH or PAY the 
consequences. But the letter usually fails to explain what truth, in 
the form of additional documentation, is needed to avoid the 
consequences.
  In New Mexico, my home State, the IRS letter could originate in 
Phoenix, AZ, Ogden, UT, Albuquerque, NM, or Dallas, TX. When 
constituents fail to figure out the point-of-origin themselves they 
come to my office. It takes a professional case worker at least 2 days 
just to track down the IRS office handling the case of a New Mexico 
resident.
  I know that the National Commission on Restructuring the IRS has 
issued its report and that Senators Grassley and Kerry have turned the 
recommendations into legislation that takes a top-down approach giving 
the IRS commissioner a longer term and more flexibility.

[[Page S9777]]

  But knowing what I know, I believe the legislation also needs to take 
a bottom-up, common sense approach. Simple things will make big 
differences.
  For example, letters from the IRS should have a contact person and 
phone number that will be answered by that one-and-the-same person. I 
don't mean a 1-800 number that is totally automated. You have heard 
about it. It is the number that is always busy, but if you persist for 
about an hour you can get through. Then it puts you on hold for another 
hour, and finally provides the following helpful choices:
  Press one for more instructions that you can't understand;
  Press 2 for more information that will frighten you;
  Press 3 for information that will confuse you further ;
  Press 4 for information that contradicts what we told you when you 
pressed one, two or three;
  Press 5 for information that contradicts what we told your accountant 
yesterday.
  I wish I were kidding.
  Part of the problem is the IRS. But part of the problem is the 
Congress, because we passed the tax laws that made the code too 
complicated. And for that we should all stand up, if we voted for those 
tax measures, and take our share of the blame.
  The IRS simplest return, the EZ form 1040 has 33 pages of 
instructions. That is the easy form. The Form 1040 has 76 pages. The 
Earned Income Tax credit instructions are 23 pages and the worksheet is 
as ambiguous as it is long.
  The National Federation of Independent Businesses estimates that 
America's businesses will spend 3.4 billion hours, and individuals will 
spend 1.7 billion hours, simply trying to comply with the tax code. 
That's equivalent to 3 million people working full time, year around, 
just on taxes.
  Another problem with IRS compliance is that there are too many steps. 
I was recently contacted by constituents trying to get their Earned 
Income check. The IRS is 6 months behind in New Mexico in reviewing the 
tax forms filed for Earned Income credits. The IRS is looking into 
about 1,600 claims and requesting additional information from the 
taxpayers. I don't fault the IRS for making sure that the claims are 
legitimate, but I do find fault with their process.
  The first letter from the IRS merely informs you that you are not 
going to get your EIC check until you contact IRS.
  The next step is to contact them and wait. In 6 weeks they will get 
back to you with information on what information they want from you to 
verify your claim.
  In northern New Mexico, many people speak Spanish. It is difficult 
for them to understand English and certainly difficult for them to 
understand the complexities that I have just described. It would be 
helpful if instructions were in Spanish as well as English. The 
Grassley-Kerry bill calls for the creation of taxpayer assistance 
centers where people can go for face-to-face assistance. I would 
suggest that some of these places these people be bilingual for those 
who have difficulty speaking English and filling out complicated forms.
  The current code is so complicated that unintended consequences are 
unavoidable.
  We recently passed a middle class tax cut--but what the Congress 
intended, the alternative minimum tax takes away. New information from 
the Joint Committee on Taxation estimate that individuals paying the 
alternative minimum tax will increase from 605,000 in 1997 to 8.4 
million families by 2007 unless something is changed. Part of this 
increase is caused by the new $500 child credit and college tuition 
credits. The perversity of the alternative minimum tax is that the more 
credits a family is entitled to, the more likely it is that the family 
will have to pay the alternative minimum tax. But we just built these 
new credits into the code, taking much credit with middle-income 
Americans. Yet, the alternative minimum tax on individuals remains in 
effect. Put another way, the alternative minimum tax is hostile to 
families claiming the $500 child credit and the college tuition tax 
credit. Middle class families will find that their middle class tax cut 
is partially taken away because of the alternative minimum tax.
  The alternative minimum tax is complicated but it is also punitive. 
Families who thought they were in the 15 percent tax bracket find 
themselves in a 26 percent alternative minimum tax bracket. An 11 
percent jump sounds bad but it is even worse when you remember that the 
alternative minimum tax base is broader than the regular income tax 
base. In other words, you apply the new rate, the higher rate, against 
a broader income than what you would have applied under the ordinary 
return.
  As I wrote Secretary Rubin last Friday: ``The alternative minimum tax 
is a trap for a growing number of American families. Most people don't 
know that it exists and those who do, view it as a tax on the rich, and 
not something to bother with. But that is not the case.''
  ``The passage of the Taxpayer Relief Act is going to turn more and 
more middle class taxpayers into alternative minimum tax payers, and at 
the same time deny them a signficant portion of the middle class tax 
cut[s we have given them].''
  We have to fix this unintended consequence, and do it quickly.
  Restructuring the IRS to be kinder and gentler will make taxpayers 
less frustrated, but an equally serious problem is the destructive 
impact that the current code has on the economy.
  The current code adds about one-third to the cost of capital, makes 
us less competitive because it is not border adjustable, and it 
penalizes savings and investment--two activities that are of tremendous 
value to our economy.
  I have given dozens of speeches on the Senate floor about why this is 
so. I am not going to do that today.
  My message today is first, to encourage every member of the Congress 
to sign the NFIB petition calling for a sunset to the IRS code, second, 
for Congress to work quickly to solve the alternative minimum tax 
problem which threatens to undermine the middle class tax cut that 
everyone worked so hard for, and, third, to move toward a new Tax Code 
that will foster economic growth.
  Mr. President, I yield the floor.
  Mr. LEAHY addressed the Chair.
  The PRESIDING OFFICER [Mr. Brownback]. The Senator from Vermont is 
recognized.
  Mr. LEAHY. I thank the Chair.

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